Mutares SE & Co. KGaA (MUX) Earnings Call Transcript & Summary

Good afternoon. Maybe you get yourself a drink and some [indiscernible] food. And then I'm very, very happy to welcome you to our Capital Markets Day here in Frankfurt. Unfortunately, outside, it's a little bit cloudy, but I think what we have to present and show today is anything else than cloudy. And I'm very, very happy to have you here. Very happy to have a lot of shareholders, stakeholders, interested party at the stream. So we roughly had 150 registrations for today. Quite a crowd here and then also a big, big group at the stream. So what is on the agenda? What are we going to do today? I will give you a brief introduction on us, company and business model. I will give you an update. I will give you a flashback of what we did and what we are going to do and what is our plan and what was promised, what was delivered. And then we kind of have two exciting insights on two of our portfolio companies on the one hand, La Rochette. So we have Pierre-Yves as a Managing Director, a paper business in France. And then we have Frigoscandia, a cooling logistic business in the Nordics, where we have just literally 2 hours ago, made an add-on made our 12th acquisition in this year. So -- and there we have Christian Klingler, also Managing Director, and he will present Frigoscandia. And then we will round up with a guidance and with a little bit more insight on it. And then at least for the people here in the room, you are more than welcome to stay and have a few chats afterwards here. I guess most of you know who I am, Johannes Laumann, I'm the CIO of the group. I joined Mutares 2016. I'm in the Board since mid-2019. And I'm basically responsible on the capital market side, but also on all the acquisitions, portfolio development, et cetera. And what I believe, and this is what it says on the slide, we deliver what we promise. We don't want to heavily overdeliver, but we never, never, never, never want to underdeliver. And I think it's very important to deliver and have trust in doing deals. We deliver deals. We delivered turnaround and we deliver the trust of the people. And those are the three ingredients, the main ingredients for our success we had in the last 2.5, 3 years, and which I'm very confident we will have in the years to come. Quick on our story for the new people founded in 2008, we hosted the First Capital Markets Day in 2019 bond together with Pareto. So we also have some people from you guys here today. And then we did the capital increase in 2021. And the latest number in this presentation is the #12 as we have acquired a cooling logistic company in Sweden just today. And our target where we want to go is in 2025 reach to EUR 7 billion in group revenues, And we want to be perceived as the leading private equity firm when it comes to turnaround business. And I think when we see our journey, which we have done in the past years and our journey, what we have said and what we have delivered in the First Capital Markets Day in 2019, where we have said we come from EUR 1 billion, we want to go to EUR 5 billion this was already delivered much, much earlier. So I'm very proud to host you here today. And now let's start a little bit more with the insight and then enjoy the day here today. And at home, I don't know if you enjoy or at the office, but at least we are sure we will do here. Looking at our company business model. So who we are, what are we doing, how is our performance? So basically, what we do is we do two kinds of deals, two kinds of transactions. One is we go to large, large corporates. And we look for the unloved child, the unloved businesses. So recently, we did an acquisition, not far from here with Deutsche Bahn, we bought a business from them in Denmark and Poland and Serbia. This was a strategic exit they wanted to do. It was an unloved child. We talked to the guys at Deutsche Bahn, they had very little idea what the business is about. That was not core. It was not performing well and it just want to get rid of it because it didn't fit the strategy. Similar type of things we acquired from Siemens Energy. Business after the demerger with Siemens AG, they defined the core strategy and they wanted to get rid of one of the other businesses. And we are the ones then to give them a solution to their problem, right? So we are the ones carving out this business. We are the ones putting it at stand-alone, turning around the business. You can imagine those are not diamonds. At the end, we -- one of the investors in New York, one said to me, you buy garbage and you try for diamonds. And I think this is exactly what we do. And we try to turn around and at the end, we try to exit then the business. So that's the first sale. The other deal you just saw today. So we acquired Frigoscandia. Christian was in the team. We have also Karl here, who is heading the Nordics report Frigoscandia from the Norwegian post, right, not their main business, cooling logistics. So we bought this business a good year ago, and we developed this business. And now we did add-on. We did an add-on, strategic add-on to the business that we have. The strategic angle on this one is quite simple, and Christian will also be able to answer more on this. With Frigoscandia, we are very, very strong in certain regions in Sweden. But we are very weak in a very important region. And the acquisition we did now is the #1 exactly in this region. So we kind of enlarged our footprint, we enlarged the density of our business in the country. So this is the second part of the deal we did. And altogether, we transacted 12x this year already. So what do we -- what is the main purpose, what is the main trigger of doing that? I can explain you what we do, starting from suppliers and customers. But the main trigger is we try to bring leadership and entrepreneurship in those businesses. If businesses are in a corporate since tens of years. There is no entrepreneurial. There is no leadership. There is no responsibility for the entire business. And this is what we try to bring in. So this is the major challenge, which is very hard to measure is to bring entrepreneurship in the business. This is how we run Mutares. And this DNA we try to bring into our operations. A little bit to the numbers. So 2021, we have reported EUR 2.5 billion, EUR 51 million of net profit in the holding, EUR 2.46 earnings per share and dividend of EUR 1.50. You see the guidance of this year, EUR 4 billion, EUR 72 million of holding at profit which will mathematically result in earnings per share of EUR 3.49. And then our target is the EUR 7 billion. So we grew more than EUR 1 billion every year since 2019, and I'm very sure we will continue to do that. So we started from off from EUR 1 billion in '19. We are now at EUR 4 billion, and our target is to go to EUR 7 billion with the same ratios of holding net income and then the target earnings per share is obviously a mathematical calculation based on the registered shares as of today. And this is the journey. This is the growth path. This is the journey a lot of you on the stream, but also here have followed us and be with us. And I think we are very confident as a Board to run this journey, and we are very confident as a Board to be successful in our journey. How did we grow? What is our asset? Why do we win the power of winning? Why are we successful? So first of all, we have a European focus. With our business buying garbage turning into diamonds is basically a local business. So you cannot sit in Munich or Frankfurt and expect that you receive offers for transactions in Sweden, in Spain, in Paris, in Milan. So we extended our footprint heavily, and we currently operate out of 10 countries in Europe. And I think this is one of the major trigger and you see a lot of country heads here today. You can meet also later, obviously. And this is one of our success factors, one of our drivers. We are the local guys. We don't operate with a helicopter principle. We have a local M&A team at site, and we have local operations, people at the end to fix the companies. Secondly, we have three diversified segments. I think this is important to understand, and let me spend a few minutes on this. We have this for two reasons. So we have the segment of automotive. We have the segment of project business to say, equipment business, and we have the segment of Goods & Services. The one reason is for the companies we own in our portfolio, it's an absolute risk mitigation because you have automotive, which is an early cycle, and I think the majority of the people in the room and at home or at the office will agree this is not the most lovely business segment at the moment. And then we have the project business, which is a very late cycle business. So an impact on macroeconomical waves, you will feel later. Auto, you will feel immediately, okay? If the world goes in trouble, you feel it on auto. You don't feel on the project business. So it's a kind of a mitigation. And then Goods & Services, we have businesses which are very stable and a little bit or almost independently from macroeconomical situation. So we have, for example, cooling logistics for food and pharma, right? You need to eat whatever the economy does. We have with SABO a lawn mower business. I mean the grass growth doesn't matter if the economy goes up and down. So this is kind of the flat business. So from a portfolio perspective, we are kind of balance. So we have always a segment which is in trouble. We have always a segment which is good, and we have one segment which is stable. And this is kind of a balance. And on the other side, when it comes to an acquisition or exit perspective, we always have an opportunity to buy and to sell. We have an opportunity to buy in segments which are in trouble. At the moment, we have seen. And in the last months, we have transacted a lot in the automotive industry. We have bought CMOS. We have bought a EUR 500 million business for MANN+HUMMEL. We have bought a EUR 200 million business for Magna. We have transacted a lot on the buy side on the auto side because that's the segment in trouble. But we also can transact on the sell side on the strong segments. So we have just signed and the closing will happen in the next weeks. We have just signed a project business of the Nordics and Donges, which was the second largest exit we have ever produced at Mutares level. Very strong business. Project business, construction business, very solid, very stable, good, profitable business at the moment. So we can transact on the buy side when they are in trouble, and we can transact on the sell side on the parts, which are good. And then on the company side, this is rather opportunistic, but I think our sweet spot has moved up. Our sweet spot is in the range of 100 million to 300 million companies, which we acquire and then turn around and put together. And then the turnaround hero, and I know the word is a little bit pushy. But this is what I believe is the power of winning. If you believe you're a hero, if you believe, you win, if you believe you win the deal, if you believe the operation people believe we're going to make this turnaround no matter the company is s***. And if we believe, we believe in the people, then we win. So the combination of the three is for me something I describe it as the power of winning. Maybe it's stupid wording. But if you believe in winning you win. I believe if we want to win a deal, we win the deal, right? And I -- unfortunately, winners will be remembered, right? You can tell me who win the Football World Cup, but you will have hard times to tell me who was second and third. Coming up quickly to the numbers because I believe we are extremely transparent and a lot of our reporting is available also online. You have seen we are on track. So when you see Q1 and Q2 2022, half year was EUR 1.8 billion, which was an increase of almost EUR 700 million in turnover, the profitability level and then coming to our guidance of EUR 472 million. In this profitability level, we have three sources of how the Holding makes money. And this is -- the three sources are triggering every decision we take on a daily basis. The first source is income through consulting and management fees. This is when our 130 people fly out on a Monday morning, go to our portfolios, try with the management or if they don't behave without, but try to fix the companies. And this roughly will generate EUR 75 million of turnover in the Holding and will contribute around EUR 25 million of profitability to this. Second stream is the dividend stream. If companies are doing well, and you see companies later on in the details. The companies are doing well. Obviously, if there is a dividend capacity, we ask them to dividend money. So that's the second stream. There, of course, we are a little bit cautious, especially in these times. So there, the expectation is something between EUR 15 million -- around EUR 15 million. And then the last source is the exit source. So we cannot have a EUR 72 million results without an exit. We can now have a EUR 35 million, EUR 40 million result, but we cannot have a EUR 72 million. So we need exits. We have performed one now in the Nordics. And a matter of fact that the project business segment and the Goods & Services business segment at the moment is quite strong. I do expect more there before we all rock under the Christmas tree. So those three sources are super important for us. Those are equally important, and those are triggering our daily decisions. Our daily decisions are triggering, can we get management fees and consulting fees out that. If this company able to dividend money and are we able to sell the company at the end with a profit. How do we judge those sources? And so it starts with the acquisition. And how do we decide for a deal? How do I decide for a deal and then try to convince my fellow Board member colleagues and Supervisory Board colleagues. When I look at the deal, I think three things are important. The first thing is can we make money with the deal. And our target is 7 to 10x of every invested euro, I want back over the life of time. Lifetime, 3 to 6 years of the holding period. 7 to 10x, I want my money back. First decision. The second one is, I only acquire companies, which I understand and where I believe my operational team can do an impact. So basically, where I say I only acquire companies where I believe I buy cheap. And the third one is, I acquire companies where I believe they have a good product and a good management in the mix. It depends a little bit on the company. So if it's a company which relies on product and people are just a lovely side effect, then we look at the product. If we believe in a company which is a people-intense company, I want to see the management. And I'll give you an example on the Deutsche Bahn deal, which we just signed, it's EUR 400 million business. The majority of the business sits in Denmark. So we will be soon very proud owners of, I think, 960 buses, 120 trains, think we have some water taxis included, and car sharing. So we will be one very big mobility provider then, Mark. But this is a people business. So I flew to Copenhagen and I wanted to meet the entire management of this business. I wanted to see who we acquire because that's at the end of USP know how I acquire. So it's important for me, do I get my money back? Can I make a difference? So do I buy cheap? Can I get a return? Do I buy cheap? And do I have a good company, product and management-wise? This maybe sounds familiar to the one or the other. So there is someone in Omaha who has similar ideas. But it's for me, in a very, very small scale, I think, is extremely valid on the turnaround sector, right? Because if I don't believe in the people, if I don't believe in the deal, and if I don't believe in the turnaround, I should not touch the company. So that is how we acquire companies. We have an acquisition invested of EUR 270 million currently -- EUR 207 million, currently in our portfolio. This is the very, very small portion of this is purchase price. The very large portion is what we call contribution. So when we acquired same for Deutsche Bahn or the big asset of Lapeyre in France, which I think Mark and I was here last year, the one in Obertshausen LMS, which we bought from Magna or the one for MANN+HUMMEL. A large, large portion of this is equity contribution into the portfolio. So it's the skin in the game. Deutsche Bahn, you don't negotiate too much on every -- you don't squeeze out the last penny in this -- in the purchase price, right? But they want to make sure that they have a solution. They want to make sure they never hear back from this asset. So they forced us to contribute cash into the equity of the company rather than paying them a purchase price. So they are more cautious in going concern of the company. So we have invested EUR 207 million at the end of September, honestly, not as of today, but 3 weeks ago in our business. And then on the rocking road of realignment and optimization, we do invest in our portfolio, and those have a lot of different sources. So sometimes we are obliged by the SPA to -- or by the purchase contract to provide certain guarantees to provide certain funding to provide in working capital. And this is something which we had to heavily -- not heavily, but we had to invest in the automotive sector after COVID. When the working capital was obviously down because coal of numbers were low and then suddenly, call-off numbers picked up. So while automotive, I think, and I worked for Porsche more than 15 years ago. It was quite a stable business. You had the break in August, and you had the break in winter. But the other months were like on the call offs were like quite flat. What we see in the last 3 years is rocking. So you have from there are deviations of 60%, 70% per month. And that you need to cover in the working capital swings, right? So this is part of the investment. But then also we have growth -- we're currently, for example, for Donges, we're currently fighting for EUR 70 million, EUR 70 million order, where we need to invest into equipment, which pays off over the project time of 18 months but we first have to invest in this in order to get into EUR 70 million order. So also the investment in CapEx is then supported by us. And at the end of the day, it's a mathematical exercise, what you see on the right-hand side. with those two investments together and with my decision target of 7 to 10x, you will come to EUR 2.5 billion to EUR 3.6 billion of RIC, which we want to win back. So this is how we make decision to buy. This is how we make decisions to turn around. And this is also then at the end, we make decision, are we ready for exit? Is the company ready for exit? And is the potential buyer universe ready to buy. And this is what I am confronted day today. And if I believe in something, I tried to convince Board and Supervisory Board, and this is basically our success story of earnings. Now it all starts to win a transaction. So if you don't have a company, if you don't have a deal, you cannot turn it around, you cannot take out management fees. You cannot take out dividends. You cannot exit. Why do companies sell to us? Why do we win the deal and not be whatever, my cousin's private equity in Singapore? Why does Mutares? Why do we want to win a deal? And I think you see it on the left side, I believe in every country we operate, we see the transactions valid for us. So close to 5,000 opportunities we look per year. We received per year. And then roughly 10%, we have a look and have a look in our terms means we go to management presentations, we look into information memos, we go to expert sessions, we conduct site visits and we are in a data room. So on 10%, roughly 400, 400-plus transactions, we look in detail on an annual basis. And our target is to make one transaction of us. Now it's mathematically not linear. As you see, we have now made 12 and in October, but this is our target. And we have met our target. At the moment, we have met the 12 deals. We see 83 projects where we are in the data room, where we are conducting site visits. Five are on the hot list where we are in negotiations of a contract, where we are at the closer to the finish line of a deal. And where we are closer to the point where we make the decision if we want to win the deal or if we don't want to win the deal and say, wish you all the best. So there is a bit to come here. So the first thing, why do we sell to us because we see the deal. The second thing is, and you see a little bit here on the right-hand side to sold to us, it's the reputation, it's the brand. It's a track record that we have solved the problem of entities. We have solved the problem of large corporates and obviously, large corporates, but also state-backed entities. If I retire one day, my first book will be about the acquisition of the state-backed entities because this is much more fun to talk about. And because those are just so heavy tankers that talk about flexibility and agility. They are everything else than this. And there are people for everything. So we -- it's amazing. But I love to buy from them because there's so much potential to improve. And then very, very seldom, we acquire from private equity firms. Those are most of the time when we do the buy and build, not the transaction on the platform. So we strategically acquire companies. It can be private equity, but typical seller, large, large corporates who trust us, typical seller also state-backed entities. And the Champions League of this is that you avoid a competitive process, an auction process, right? And we have companies, for example, like Magna, or like Siemens Energy, who did not engage an investment bank. I'm sorry for the investment bankers here at home, but they didn't engage anybody. They just approached us and say, do you want the deal. Look at it, you get 3, 4 months exclusivity. If you don't want it, I'll bring it to the market. But this is the trust and the strength of the brand to say, okay, we go to you because we believe you provide us a solution. And then at the end of the day, I have to admit, it's a people's business. Even though there are a lot of money involved, it's a large corporate, if it's a 100-meter run, the last 5 meters, it's two people do a deal together. And if you don't connect and if you don't speak the same language, you will not win the deal. And we speak the same language because of our operational skills. We speak the same language because we are local in the countries. And I think at the end, we also speak to the same language because we have good guys and girls at the end of the day. And a lot of times, and it was the same with the latest transactions, we didn't pay the highest price. But we had the most reputation and we had the connection to the seller, and that made a deal. Those are the three points, I think why we win the deal. So after we have won the deal, the acquisition, we need to do the turnaround. So why do we win a turnaround? And I think one of the major things why we win the turn around this because I think we approach it differently. There is a spirit in this group that you never give up. And you always face the trouble, you always face the storm. And when you flash back the last 2.5 years, trouble and storms were everywhere, right? So Brexit, COVID, war, inflation, energy prices, the auto people, they didn't have chips. So there was trouble and storms all over the planet. And we have a good example within Mutares, which we recently shared. So I have, a little extras, I have family in Texas and they raise cattles, okay? And you have two types of cattles. And if you have a home cattle, it doesn't matter, okay? It goes to the house every night and sleeps. It's all fine. But you also have white cattles. And if a storm or a bizzard hits the ground. You have two types. You have the bulls and the cows and the cows run away from the storm. And they are exhausted and the majority of them will die. And the bulls will face the storm, have a super hard time because they go -- they run, they start running into the storm, into the blizzard, yes, into the madness basically into the trouble. And they have a super hard time, but once they are through, they're through. And I think the second part is Mutares. We never run away from something. We always face the issue, we face the trouble, and we are sure and we are convinced we can do it at the end of the day. And I think this is a big, big difference to others that we face the problems. We know about them. We can judge them. We face them. and we never, never run away and we never give up. And I think this is the success stories we can tell. You'll hear two of them today. I don't want to take yours upfront Pierre-Yves. But when you look, for example, at what Pierre-Yves will tell you later on La Rochette, we have a paper business in France. Energy consumption -- you can't imagine the increase, and you will tell that later. You can't imagine the increase of net consumption in the last 12 months. It's not doubled. We would be super happy if it's double. It's not triple. We would be happy if it's triple, right? So -- but we faced the storm, and this company remained on a high profitability level because we took actions. We went through the storm. And now I -- you will see later on the sun is shining quite brightly. Lapeyre second one. Lapeyre, you heard last year, manufacturer of doors and windows in France. In the first 9 months, Lapeyre had a price increase on raw material and energy of more than EUR 50 million on the cost side, EUR 50 million. Now you can run away and cry and die or you face the storm. And Lapeyre faced the storm. And at the end of the day, the promised profitability of the company remains the same because they took actions. They increased price. They looked in how can I source better. They look into how can I make processes more efficient. But you have to handle this. You don't have to be afraid. You don't have to give up. If you face EUR 50 million more costs than you have sold in January, this is not that you wake up in the morning and say, I have a solution. So this is hard work. This is you need to face a hard, hard time to go through that storm. And last but not least, we have a company in India. We acquired from Cooper Standard. It's an automotive business, ceilings and fluid parts. And we acquired that in the middle of the first lockdown of COVID. And our business model, as you know, is we acquire a company, we sent our troops, they fix the company and then we try to sell. There was no chance to bring our people into India for more than one year. And this company was just a loose end and we didn't really had a crib on this company. So however, we own this company, we keep this company, we are responsible for this company. After more than 1 year, we did manage somehow to send a team into India. The profitability of this company went from minus 20% to plus 20%. When they arrived in India, they found something to work, let's say, to be polite, right? I remember, Mark and I had the first the call, the calls when they arrived, I said, guys, it's everywhere we look it's a disaster. But they face the issue. They have been there for months in the beginning. They didn't come home as we said, you can come home after one we had kind of a regime with them. They know we stay. We have to face that storm. And I think this is important to understand. This is the people we bring in are entrepreneurs. We bring in commitment, and we face the storm. So this is how we win turnarounds. And last but not least, how we win people, how we win people's commitment. And I think you can explain it very nicely on ESG, but you can also explain that very nicely, I think, in one sentence. And this is you need to get trust if you walk the talk. So what we do, we believe in doing. We don't do things for the paper or for the documentation. So -- and I would like to explain it very easy to you on our -- on the ESG criterias, which we follow and which we do. So on the one side, when it comes to energy, you can do a lot of things on energy. But at the end of the day, it needs to make sense for us, okay? We don't do it for the purpose of being releasing press documents and saying, we are the most cleanest country on earth. We're doing it for a business reason. We're doing it, for example, in over towers and automotive factory where we try to get energy independent. So we talk to the city. We want to set above the solar park next to us, which gives us an energy-free production in this facility, right? We do look in every factory we acquire. We have a partner that goes in changing the lighting, changing the heating, changing the air condition to an energy-efficient thing. Why? Yes, it's green, and we want to have a sustainable world. We all have kids, and I would like to see my daughter in 50 years living in a nice world. But it also makes sense because the energy consumption you safe with the new equipment is much, much higher than with old equipment. When it comes to the social part, I think it's two things are important here for [indiscernible]. And I just want to get the point diversity and employee satisfaction on this slide here. Diversity, I believe -- if you have one problem, and if you diversify the group to solve this problem, this is the most efficient way to do it. If you -- now I'm saying it badly, if you put overweighted man in white shirts around the table and look on the same problem, you will not find the same creative solution on this if you put diversified people. So with us, we believe when we have a problem. We don't look on higher fee or we don't look as we look at who are the best ones to solve the problem, do the best ones to help us here and fix it. And the second thing is satisfaction. In the last 3 years, in Mutares Holding, we have now roughly 200 employees. Our fluctuation was below 5% in the last 3 years. I think this is a great achievement. If you look at consulting companies, if you look at the funds, you are in the range of 15%, 20%, and that's good for them, right? Below 5%. This is satisfaction of our people. So we do something right. We do some social part, we do hard work. There is one or the other party. But at the end of the day, it's about if you have -- I believe, if you have happy people in the company, you have performing people in the company. And then last but not least, on the governance side, I think it was important for us when we did the capital increase, and also today that we provide as much transparency as possible. I know our business is not always super easy to understand. But we have nothing to hide. We want to provide transparency as much as we can. And that's why we got uplisted here in Frankfurt. And we try to be fully fledged transparent as good as we can and as good as we can also transport the messages supported by facts and figures. And with that, I would like to close the section of the company and business model. Important for me to take away for today is. This is a situation, which is not the most pleasant one when you look at the macroeconomical situation. However, and I think we have proven that companies like us, like this situation. We are one of the beneficiaries of this situation for two reasons. The one is, I think our business model complies very, very nicely with crisis situations. And I think secondly, we have quite bullish people to overcome the situation, face the storms, face the difficulties and run in the storm and not run away. And this is our two key success factors. We take the market, and we love the market at the moment. And we have the right people to overcome this crisis situation. So thanks very much for the moment. If there are questions now, you can shoot them. And this is then the time for the questions on the Mutares part, and then there will be the company presentations later on with questions. And so if there's anything you want to know, and I can answer, I'm happy to do so in the next minutes. Thank you very much.

A question regarding the way you buy companies nowadays. How much you get -- what is the share of the reason? What is the share of actual cash payment for the assets you're buying? I mean is this changing? Are you buying -- are you putting more money than you're getting to fund the turnaround? Or has anything changed significantly since -- over the last 2 years in the type of deal structure you pursue?

Not really. I think, is the honest answer. What we see is that the component of safeguarding that the company has a future and that there's a going concern becomes more and more important for the corporates rather than telling them there is a purchase price. So I'll give you an example. I don't tell you which transaction because it would be violating some nondisclosure agreements we signed. But we had a transaction where actually the seller came to us and said, can you inject more money than we just did? So we have negotiated a certain amount. Then he said can you inject more money than we said. And I said, well, it's sufficient for my business plan. And he said, no, no. I kind of want -- he literally said that, excuse my French, I want to cover my a**. So for every euro you inject, I inject 3. So Obviously, we injected something then. But the sensitivity on the future and a little bit of fear, actually, you can also say the fear of the corporates by divesting this has increased in the last 2 to 3 years. No impact on the purchase price because purchase price is not even 20%, I guess, of what we capital commit.

What about your competitors? You must look what they do. You know the competitors, yes?

Yes. And we know them, not in bad things because they do their things well, but I don't care about them. Firstly, as I said, if I speak about competitors, my biggest competitor is the seller, not selling the business. It doesn't -- it shouldn't sound arrogant. But I believe if we -- as I said before, if we want to win a deal, if we want to win a turnaround and if we want to win trust of people, we will. So yes, I know there are competitors in the market. We just received one of the biggest complements since I'm a Board member since 3 years where there was a transaction in France, and we were told by the adviser. We can grant your exclusivity because all your competitors have asked if you're in, they will not offer something. So I believe if we want to win, we win. And I think they are all in other needs. They're doing their deals. They're doing well. We know them. We sometimes speak to them, but my competitor is the seller.

To the current situation, we see mainly industrial companies have a blow up in the working capital because of this interruption in the supply chain because of inflation and being ahead of the curve and having more stocks here. What does it mean for you as a holding company and having industrial subsidiaries did say need more cash, give you then the cash? What is it about your cash situation? It was not able to launch a straight bond? How's things going here?

Speaking about the portfolio companies. Yes, there is additional or there is extensive working capital need in some of the businesses. Not in all, but in some of the businesses. So in the first instance, obviously, they try to cover it, right? You need to go to your customer, you need to go to a supplier, et cetera, et cetera. But if we do see a working capital swing, which goes up and down, which we currently see. And we have [indiscernible] here today, who is heading, for example, the automotive business side. So if you come from a June, July, August level in the automotive and then we saw September. So you have a peak of like 40%, 50% in some of our auto businesses. So in the first step, actually, I think LMS, which is the biggest one here, over 1,000, they finance it themselves. But you have a high, high working capital needs. However, you're going to sell it off as well. So 30 days later, you get it back. So basically, we do bridge finance some of them. But in the first instance, we ask them to do it themselves through their balance sheet, right? Cash situation at holding level. We -- you mentioned the bond. We looked into a replacement of our existing EUR 80 million bond. So we have an EUR 80 million bond outstanding done in January 2020, maturity until '24. And we looked in the potential replacement and larger bond. However, the market conditions and the offers we received from potential investors. For us, as a management, we decided at the end that it didn't make sense for us. So there was no immediate cash need. There is no need to replace the bond when it's until '24. So we decided to not pursue that, to not open a book and come with that potentially later into the market when conditions are changing. And when basically the interest rates are not double digit, but in a normal level again. At the moment, there is sufficient cash at holding level and in the group. Group level has around EUR 300 million of cash in the different portfolios, sub holdings and the Mutares Holding. So we are, I think, well prepared and set for this. But obviously, and you're completely right, there is a lot of working capital pressure in the portfolio companies due to energy, raw material, et cetera, et cetera. But I also believe that our operational guys are one of the best cash managers in the world. So we are overcoming the situation quite nicely. So I can give you a funny story when we acquired a company like half a year ago. They came on day 1 and say they need EUR 10 million of working capital financing. So that was like the first or the second week, until today, they didn't need any. So I think the attitude in the corporate, what working capital means and the attitude of what we believe you can do with the working capital is a little bit different.

What's the interest on the current bond?

6%.

So when you show this inverted pyramid and the 83 transactions where you are in a data room, and it's roughly EUR 1 billion of sales. So basically, that's your kind of pipeline for next year, let's put it this way. Is it wrong to understand it that way?

Yes, it's wrong for this year.

But you already added EUR 1 billion. So you would add a second $1 billion before year-end or...

No, no, no. So the pipeline is like a funnel obviously, okay? You have -- and there is another layer. There's a layer where we just received something and say, thank you not for us. And then there's the layer which we look, which is this 83 projects, which I think it's $8.8 billion at the moment. And then we have five projects, which is, I think, roughly EUR 700 million, EUR 800 million at the moment. And those five are the ones which can be materializing this year if we want them, right? So obviously, we are advanced in this, but at the end, it needs to come together with -- at the end, it's a question of price and question of risk and question of -- and what the seller wants to give. But those 5, they can all materialize or we don't want to have any of them or we want to have 2 or 3 or 4 or 5.

If I hear this regarding the revenue this year that you can still maybe add some EUR 500 million. Is it maybe time to rethink the forecast for 2025 because EUR 7 billion seems to be a little bit conservative then.

We also want to sell. And it's not the intention to grow the Mutares portfolio to 50, 60 companies. I think with around 30 where we are right now, that's a good portfolio number, right? So we're not stuck to that. If we have 31, we are not obliged to sell one. Or if we have 29, we are obliged to be crazy and buy one. I think 30% is a good number for us and also the way we are set up and the way we want to manage Mutares. So the companies will be larger, which also means when we do an exit, it will be larger. So for example, -- the one we just sold in the Nordics and EUR 240 million will go out now of the turnover. And there is more to come for this year. So we'll still divest a couple of EUR 100 million. That's net. I think net growth of EUR 1 billion is okay. Good. I think at least we here in the room have the opportunities to continue now in a coffee break. And if there are more questions. And now I would think we see each other back, so we make a break now until 05:45. So good, around 20 minutes of break. And then the stream will go online again. There will be now coffee cake, whatever here in the room, so feel free. We will also try to put some oxygen in the room back again for the bullish buffaloes and not the cows to run away. Thank you very much. [Break]

Al right. There will be more time later on for a few chats and more coffee, more food. Let's deep dive a little bit. So I was talking about the spirit, and I was talking about, we are facing the storms and going through the storms, and I'm very happy to have 2 guys who are facing the storm every day from the operations team. And we will kick off with La Rochette. La Rochette is a cardboard manufacturer, which we acquired from Reno De Medici in a combination of the Italian and the French transaction team. And it's in France in a wonderful area, if you like, skiing. If you're afraid of mountains, you shouldn't go there. And I'm very happy to have Pierre-Yves here, Managing Director; and Pierre-Yves will present La Rochette. We know each other since quite a long time. I think you were one of the first people I met when joined Mutares and somewhere at the end of the Netherlands. And so we will give you a quick introduction with a short clip on La Rochette, so you get an idea. And then I'm very happy to hand over to you, Pierre-Yves to introduce La Rochette. [Presentation]

Hello, everyone. I'm Pierre-Yves Guégan. First of all, I would like to say thank you to you, Johannes, to you, Mark, to give me this opportunity to present you today our La Rochette Cartonboard turnaround case. I have to admit that I'm extremely happy, extremely proud to be here. because I think that what we did as Mutares operations in La Rochette is a fantastic journey. And again, really happy to go into more details with you today and to explain you what we did and how we did this. So I'm Pierre-Yves Guégan. I'm married. I live in Paris, Savoie. I think it's quite clear based on the accent -- of my accent. I work on it every day, but I am married, I have 2 children, and I live, yes, in Paris, Savoie. I work in Mutares since more than 6 years now, so in Mutares operations. And my role is to take the lead of the companies depending on the acquisition. And I go wherever the people need me in order to develop the company. So my role as a summary, is starting day one to understand the challenges and to develop the opportunities. This is as simple as this is. Before going into more details, I would like to underline one thing. I'm the only voice you will hear today regarding La Rochette. But it's really important to understand that there are a lot of people in the back. And I would like to start my introduction with this. This is a teamwork. The first team, of course, is the one from La Rochette Cartonboard. It means the Board of Directors, of course, I have been working these last 18 months with them on a daily basis. But it's not only about the Board of Directors. It's also about the managers. It's also about the reconcile and it's also about the employees. The first idea, the first thing we have to do is when Mutares operation when we arrive in a company is how to create a team. That's the first part of the team because there is also the Mutares team. Johannes, you mentioned earlier, this team spirit that we have in Mutares. And I heard a question about competitors. I would say, based on my experience because I did also consulting companies before joining Mutares. That makes a huge difference. And that's exactly what happened here in La Rochette. Since day one, I had the support of full team of consultant from Mutares. And you cannot imagine the peace that it brings to the company. We know each other since a very long time now. And the idea is that we can bring clearly, another mindset in the company and bring improvement for the coming months for the coming weeks for the coming days. So let's go now into more details regarding La Rochette Cartonboard. So as it was mentioned in the video, La Rochette is producing cartonboard for packaging. 2 type of markets, pharmaceutical products on one side and food products on the other side. It's about 50-50 in terms of percentage. And regarding the markets, we sell most of our products in Europe, most of them in France, in Italy, also in U.K. I bring some samples for sure. I'm sure that based on the samples that I have here, you can imagine, clearly see that I think most of you already had some of the carton from launch of cartonboard in your hands already. So today, I would like to present you this turnaround case. I will go in 2, in 3 -- sorry, 3 different segments. So first, how we drove the change. I will start with the context what we found in La Rochette Cartonboard starting day one. Then I will go into more details regarding the situation of the company now. And then I would like to quickly show you what it means working in Mutares, what are the objectives that we are working on. So a little bit of context. And I think that you will clearly understand with this slide, all what has been mentioned earlier by Johannes regarding the context and why, at the end of the day, as in Mutares operations, we are so happy to enter at day one because you cannot imagine the number of levers that we have in front of us. And that's really good because the worst which could happen is to enter in an underperforming company without any license. So coming back to the context of La Rochette Cartonboard. That was a group context. It was part of RDM. I have nothing against RDM. But it means that La Rochette Cartonboard was included in 8 -- more than EUR 800 million turnover group. It means 13 plants overall. With -- the core business of the RDM is recycled carton and La Rochette is not producing recycled carton, but virgin fiber. So it was not core business anymore. The headquarters of RDM are located in Italy, and there was no specific sales team in this French plant. So it can give you already an understanding on what we found. We found employees who like their job but without any motivation. They didn't have clear understanding on the future. Performance management. No cash forecast, no clear view on the margins. I love it because how can you drive the future of a company if you are not able to anticipate the cash and if you are not able to understand where your margin comes from. So immediately, after the first week, we clearly understood that some clients were clearly unprofitable. So the idea -- and by the way, I did several companies already in my professional experience. And again, you cannot imagine the number of companies that we have that we acquire where it's just exactly the same case. No view on the future. No tool to drive the strategy. Third part, breaks of production. It was not because of the CapEx. But I would say in our case, it was mainly because of the organization. The net loss, they had no preventive net loss. So they were more in the fire mode. As soon as there is a break, yes, everyone is ready to run. But that's not the way. You have to work because then you have problems, and you cannot deliver all what is requested by your clients. And then last but not least is communication. I mentioned it also in the video. Maybe it's something quite common to say we have to increase or to improve the communication but it's so obvious. I was the CEO for 15 months of this company, but obviously, I cannot do everything alone. I need the people. And the best way to have people with you is to explain them where we are, what is the status of the company and where we want to go. And then we can discuss all together on how we will go in this direction. That was key. We had no communication channel in place. And yes, first of all, employees did not know the result of the company. They didn't know that it was underperforming. I did not mention here, but it was the same with work council. And work council has such an important role to play. So of course, this resulted in average result over the last 6 years before acquisition. Turn over about EUR 120 million and EBITDA positive of EUR 6.2 million. Believe me, in this type of business, this is what we can consider as underperforming company. So what we did, that's a big summary because we did a lot. And then when I say we, again, I speak about the team. The first thing that we had to work on is identity. They need, and when I say they, all of the employees of the company need to understand that we are a stand-alone company. If I come back to the cash topic that I mentioned before, what happened in the past is that at the end of the year, if they didn't have enough cash, then the group decided to put cash again. And then, let's say, it was another kind to go for another year. But that's not the way we want to make this thing in Mutares. So we started with creating this logo. I'm really proud, by the way, of this logo and the name. We need to change as soon as possible all the signs from the previous group that we have everywhere in the company. It's so important. And also, some stupid thing, but in the street, when you have the name of the company written more or less everywhere, you need to change all of this. You need to change your classes. People need to understand that they are working in a new company. This is a new mindset. Organization of the Board of Directors, I did several changes because, obviously, the strategy was not worked -- didn't work really well. So I did, yes, several changes in order to create -- in order that they need to understand that they have to create their future. We don't depend anymore on a group, which is located in Italy or anywhere else. This is not Mutares headquarters, taking the decision for them. This is them who drive their own future. That's the first thing that is really important that they have to understand. And then we worked, of course, on communication. So internal communication first, with work council, with employees. And as I just mentioned before, work council are extremely important. We cannot meet on a daily basis all of the employees. So of course, you speak first with the work council. And then they have also to bring the message to all the employees in the mill. External communication, of course, it's important when you come from a big group, a large group like RDM to a stand-alone company, some of your customers, some of your suppliers wonder about the future, what do you want to do? And this is really important since day one that we have a clear communication with them. And we -- for some of them, we need to reinsure them explaining where we want to go. This is also the case in term of external communication with politics. One of my colleague, Andreas [indiscernible] told me a long time ago, Pierre-Yves -- it was my first stance as a CEO in Mutares. He told me, Pierre-Yves, 2 things that you have to do as soon as possible. The first thing is speak with work council. They have to be the first having the information about what is going on. Second thing as soon as possible, a bit later, of course, the politics, the local politics. And in our case, it helped a lot. So this is about identity creation. Then the second thing, what we have been working on is the sales development. So we had to create a sales team because, okay, we had a TSA, which was proposed by the seller. But that is not the idea. All of the decision that you take have to be taken into the company by the people who are really dedicated to this company. So we created quite fast sales team. I'm happy that we were able also to recruit the sales administration team, which was already working for La Rochette [indiscernible] because they are the one having a daily communication with the customers. We worked on the margin tool creation. This is obvious. I think, again, it was not existing in this company, which seems a bit strange. Of course, if you go tomorrow to create a business, if you go to see the bank, the first thing they will ask you is what about the business weather. And for this, you need to understand where the money comes from. We developed the client intimacy. And of course, we went into clients' negotiation, especially for the one which were at a low level of profit. The results of this is we came from EUR 121 million turnover in 2021 to the forecast, the last forecast, which has just been realized beginning of this week EUR 185 million end of '22. In terms of gross margin, while everything is increasing, while energy is going like crazy. We have been able to maintain our margin at -- from 60% to 63%. And the third thing, I speak here about investment, but the topic is what we did in terms of manufacturing. And of course, we invested a lot because you saw in the video, the machines, which are for some of them quite old. And it's important to have a large amount of CapEx in order to maintain this. So we investigated, thanks to the mix expert in manufacturing. We investigated the plant in order to make an action plan and in order to prioritize what we have to do to make sure that it is running. Creation of a priority list. Implementation of a ROI methodology. Again, it seems really simple, but that's one of the reflects that they didn't have. As soon as we speak about CapEx, I'm open, as I mentioned to them, I'm open to every single CapEx. But for every single CapEx that you present to me, I want to see the ROI. And then, of course, if you show me a very good ROI, you are more than welcome. All CapEx financed by banks. Coming back to your question earlier, I think that's also one of the strengths into -- of Mutares is that we have very strong experts in finance. And in our case, we have been able to finance all of our CapEx with the banks. So total CapEx of EUR 7.9 million in 2022. Of course, a big portion linked to energy, linked to what happened, lean and quality, production and of course, safety. So La Rochette Cartonboard, as I mentioned here in the title, has been able to handle the energy crisis. That's a very -- that was a very strong topic for us. Frankly speaking, in May '21, when I arrived in La Rochette, I was absolutely not energy expert. But I had to, when I discovered that La Rochette is buying 130 giga per year. And linked to the increase that we faced on the market, this became one of our biggest level of cost. We speak about EUR 50 million, depending on the level of energy price, EUR 50 million per year. I need to tell you in a few words to tell you more about the context. The thing is that first of all, in 2021, I discovered we had this energy crisis going up, that we didn't have any forecast contract. We were on spot. Basically, it means that every day, you don't know what will be the level of price of tomorrow. That's the first thing, and it was too late, obviously, to implement a forecast contract because all of our suppliers were saying, "guys, it's going crazy. Don't buy now, stay on spot, and we will wait for a better time." We are still waiting for this better time. And the second thing, it's something typically French. You have to know, but I think that in Germany, you are also thinking about the same type of process. There is a subvention which is given, I think it was implemented in 2010 in France. A subvention, which is given to all companies who are buying electricity on the market. It's a direct subvention. And every year to decide what will be the level of purchase you can make with a specific price. Okay. I will now go into more details what it means. If I take the assumption as of today, we speak about 60% of your cost of your invoice, which is capped at EUR 50. So while we were buying on spot, EUR 350, depending on the day, EUR 400, even sometimes more than EUR 1,000. We could buy 60% of this at EUR 50. We speak here about a potential of more than EUR 20 million direct EBITDA effect. But the thing, coming back to the context is that the previous owner decided in 2020 to sell in advance these rights that was obviously not a good idea. But it was then too late for us to come back to these rights, and we had to wait for the end for the next year. So that's what we faced in 2021. It was also the case in 2022. What does it mean? It means that for all this period of time, La Rochette Cartonboard has been buying its electricity on spot market. Regarding the increase that we had in the market, we had to take a decision because clearly, we came to unprofitable situation or -- and we cannot decide to continue with unprofitable situation. In this case, I prefer to ask the rockers to stay home because at least they don't create negative value for the company. And so the decision that we took as the Board of Directors, La Rochette Cartonboard, is to go for a viable surcharge. For the one who knows the process, it's more or less like a fuel for transport, okay? That's the way it works. So you have it at the bottom of your invoice. And that's what we implemented with our customers. So basically, what we did is it , we did a formula, we did an average of the cost of electricity over the last 15 days that will be impact as a surcharge to our customers 15 days later. So good thing with such a decision is that it's extremely transparent. The bad thing is that the customer doesn't know what will be the price of the coming days. But we have been able to implement this. And of course, in the second step, we had to negotiate with clients. That was not the funniest part, but it worked well. We did letter, we did calls. And of course, we did the meetings with some of them. And the argument that we gave -- I'm not here to create losses to my company, and that's obviously what you don't want also. We should never forget that the customer doesn't want to work with an unprofitable supplier, never. Explain them that it was possible to cancel the orders and that we would be back to a normal situation in 2023, time for us to go back to our [ RN ] rights. Coming back to politics that I mentioned earlier, it was important in this case that I already had a connection with local politics because when energy crisis arrived, I was able to then contact them again, I had that a lot. So regarding the results of what we did is you can see here the cost of energy, euro per tons, what we faced since January 2021 until September 2022. So this is a very nice increase, of course. And what we did on the selling price. We've been able in December 2021, we already increased our price by 18%. And in September 2022, we speak about 65% increase in comparison in January 2021. Of course, as I mentioned here in the title, it is really important to benefit from your position in the market. You need to understand really fast what is your position, what are your strengths and what you can do. And then you can decide on the strategy. So what is the main objective of Mutares? As I mentioned in the introduction, the main objective is to understand since day 1, what are the challenges and what are the opportunities? And then you drive your strategy. What -- how we work in Mutares? We already start with a 100-days plan. So we make analysis. We changed the mindsets and obviously, we also implement quick wins. Here, we -- as I mentioned, we had a full MUX team to support the development since day 1, and it resulted in new market development, productivity improvement and financing potentials. Then we have the development phase. The goal is to implement the action plan that you have been working on in the 100-days plan and to get, obviously, the results. And I'm extremely proud to show you the results that we have been able to get in La Rochette Cartonboard. We have been able to come from EUR 121 million turnover to EUR 185 million, which means an increase of 53%. And in terms of EBITDA, we have been increasing by 106%. I would like to say a few words as a conclusion. I received on Wednesday last week, text message from the head of the work council of La Rochette Cartonboard, while I'm not over there since July. He was saying, Pierre-Yves as soon as you go back -- come back in our area, it would be a pleasure for me to have a coffee with you. And yes, just to get in touch. It shows me that I think we succeeded in the turnaround of La Rochette Cartonboard. Thank you.