SCHOTT Pharma AG & Co. KGaA (1SXP) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the SCHOTT Pharma Conference Call for the Fiscal Year '23, '24. [Operator Instructions] Let me now turn the floor over to your host, Tobias Erfurth. Please go ahead.

Thank you very much, Alexander. Hello, everyone, and thank you for joining SCHOTT Pharma's earnings call for the fourth quarter and the fiscal year 2024. My name is Tobias Erfurth, Head of Investor Relations, and it's a pleasure for me to host our call today, in which we will reflect on the successful fiscal year 2024. With me today are our CEO, Andreas Reisse; and our CFO, Dr. Almuth Steinkuhler. As always, Andreas will start today's call by sharing the key business and financial highlights of SCHOTT Pharma in the fiscal year 2024. He will also provide an update on our growth strategy, including our achievements in innovation and expansion this year. Following this, Almuth will take us through our financials for the fourth quarter and the full year 2024. She will also give insights into our sustainability progress and present our financial guidance for the fiscal year 2025 and the midterm. Afterwards, Andreas will conclude the presentation with an outlook on our strategic priorities for 2025. Before we begin, you might see Slide 1 already, I would like to draw your attention to our disclaimer, which we encourage you to read. Additionally, please note that when we talk about the fiscal year 2024, we are referring to the period from the 1st of October 2023 to September 30, 2024. This means that the fourth quarter relates to the period from July 1 to September 30, 2024. With this, I would now like to hand over to our CEO, Andreas Reisse. Please go ahead.

Thanks for the introduction, Tobias. Welcome, everyone, and thank you for joining our earnings call for the fourth quarter and the fiscal year. '24 was very successful year for us. Therefore, I'm delighted to share the latest business and financial developments of SCHOTT Pharma with you. Let's dive right in. So I'm very satisfied with how the fiscal year '24 went for us, and I would like to begin by highlighting a few of our key achievements. First and foremost, we delivered strong revenue growth at high profitability levels, surpassing all our full year targets. Secondly, as many of you know, our HVS growth is a central part of our growth strategy. Therefore, we are proud that we have also exceeded our ambitions in this regard. This year, we generated 55% of our total revenues with our strong margin in high-value solutions. Furthermore, we celebrated our first anniversary as a publicly listed company. During this time, we translated our industry leadership to the capital markets, reaching several milestones in fiscal '24. The promotion to the SDAX in December '23 was followed by another promotion. And since September this year, SCHOTT Pharma is part of the index. We are very glad about the market's trust and the recognition and appreciation of our achievements. We also made significant progress in our global expansion by continuously increasing production capacities. We are strengthening our ability to serve our customers worldwide and to meet the growing demand for our products. And finally, we introduced a number of newly developed and commercialized product innovations. Our strong innovation pipeline positions us to capitalize effectively on emerging opportunities and foster sustainable growth in the future. This in return further strengthens our HVS portfolio. So taking all of this into account, we can look back on a very successful year, most prominently underscored by our financial performance, which I would like to take a look at now. So looking at our financials, we have delivered or overdelivered on all our targets, even after raising our revenue guidance earlier this year. Accordingly, we are very satisfied with our performance. Our organic revenue growth landed near the upper end of our updated revenue range from Q3 so surpassing the originally targeted range. Our profitability also significantly exceeded our expectations by achieving a record level. So overall, we also almost met our projections for additional KPIs, which we provided at the beginning of the year for further background. So I already mentioned that we progressed faster than expected, with the expansion of our HVS revenue share already accounting for 55% of our revenues this year. We are well on track to achieve our midterm goal of exceeding 60%. With CapEx totaling EUR 145 million, we ended up EUR 20 million below the provided range, and Almuth will present more detailed information on this later. So in line with our projection, we propose to pay out 16% of our net income as dividends to investors, equaling EUR 0.16 per share. That would be a slight increase compared to the previous year. So summing up, our financial performance in '24 is another proof point of success of our growth strategy that is directed at leveraging the most important pharma trends. And not to forget, our organization was able to adapt very quickly and flexibly changing market environments. Let me now share my thoughts on this year's development on the market. So over the past 12 months, the demand dynamics across the major pharma trends were strong and improved stable across the board. And with our pure-play focus on injectables and our strong product portfolio, which is the most complete portfolio in the industry, we remain ideally positioned to capitalize on that. I know that many of you are familiar with the mega trends we serve as we have discussed them in our previous calls. Today, I would like to share an overview of these trends shown on the left-hand side and how we address them, with our extensive product portfolio in the market shown on the right-hand side of the slide that explain how we benefit massively from these trends. So the demand for GLP-1 products remained enormous and continues to grow fast. You could even say that it is now entering in its growth phase. Front and center are diabetes and obesity treatments and GLP-1 weight loss drugs have gained new approvals globally. For us, GLP-1 is a major growth driver for the future and SCHOTT Pharma as a company benefiting from the steep ramp-ups for diabetes and obesity treatments. On top, it looks like this drug category also has potential to treat further applications such as different forms of dementia or Parkinson's disease. We facilitate these treatments with our portfolio of prefillable glass syringes and our cartridges also as a ready-to-use RTU format. Since we are able to support our pharma customers in whichever direction they want to go in this still very dynamic market. Looking at mRNA. The technology has seen a steady boost with a constant stream of new research being published and an expanding number of applications both within and outside of [ vaccines ]. Beyond COVID, RSV and combined flu COVID treatments, which are mRNA based, for example. With our prefillable polymer syringes, we are preferred partner of the major producers. And we also see developments in the field of mRNA cancer therapies, which we can address with our ready to [ sides ]. Our innovative solutions are designed to ensure the stability and efficacy Of mRNA-based therapies. Another trend that is shaping the pharma market is antibody drug conjugates or ADC in short. Throughout the year, clinical trials have demonstrated significant potential for personalized cancer treatments, and we expect to receive ADCs to receive approval in 2025. To meet the complex requirements of the therapy, we offer specialty vials such as our coated vials, both sterile and nonsterile formats that ensure the stability of the drug during [ life ]. ADCs are a trend that has already enabled growth for SCHOTT Pharma and we are very optimistic that demand will increase in this field in the future. In fact, we are currently in the sampling process with over 50 companies that are developing ADCs. So in addition, we have leveraged opportunities along further trends. The notable shift from intravenous to subcutaneous administration saves both time and money for the health care system, enabled by technologies like [ Halozyme ]. We are there to meet market demands with large volume prefillable polymer syringes and cartridges. We have also shared our thoughts on the trends towards self-administration of drug at home with you before. The field of home care solutions has continued to grow in 2024. That's the benefits of a simplified process for patients and reducing cost for the health care system shine through. Many of these drugs are administered in high drug volumes and our solutions are made for this, particularly our large prefillable glass and polymer syringes as well as our cartridges. And finally, pharmaceutical companies are undergoing a manufacturing transformation towards ready-to-use solutions. This is an ongoing development. So it has also been further supported by regulatory initiatives. We are able to capture a larger part of the product's value chain by offering our extensive reuse portfolio and those HVS products. Currently, this includes re-use vials, cartridges and syringes. Another trend I would like to touch upon is sustainability. We see sustainable manufacturing processes and products as the future of the pharma industry. We are driving this trend, for example, through closed-loop recycling project with Takeda and Corplex to increase resource efficiency and reduce carbon emissions in the pharmaceutical supply chain. Also, we introduced optimized nest designs, which significantly lower waste. Almuth will provide a deep dive into further sustainability topics later on. So all of these are great examples of how we are ensuring that we meet the evolving needs of the industry, both alongside new therapies as well as industrial needs of our customers along their supply chain. We have seen a volatile market throughout the year. And yet we were able to grow our numbers, thanks to our strong strategy and our positioning, benefiting from all major pharma trends. So leveraging these developments, our growth strategy worked well in '24, translating the market trends into our business and based on the pillars of innovation and expansion together with our focus on trusted partnerships which drove the shift of our revenues to high-value solutions. Short reminder why this is important for us. Our high-value solutions include all products that come with enhanced functionality, like in unique coating or ready-to-use solution. These solutions are our most innovative and in-demand technologies as we solve a particular issue for our customers and take costs away from them. We can sell them at a higher price those achieve a higher margin. In turn, this drives our profitable growth strategy that has been more than successful over the last years. I would now like to update you on the execution of our strategy, including more information on our innovation milestones and our expansion projects. So let's begin with the innovations. Our strong innovation pipeline strengthens our position as an industry partner, proves our pioneering capabilities and drives growth also in the short term. Some highlights throughout fiscal '24 and recent months include our optimized nest designs for prefillable polymer syringes and ready-to-use cartridges. With both product innovations, the external dimensions of the nests remain the same, while we can increase the packaging density by up to 60% per nest. So both products greatly increase the efficiency of our customers' production processes, reduce manufacturing time and cost and lower the carbon footprint for pharmaceutical companies contributing to better environmental impact of the product. So these developments underline how we think along the value chain of our customers and step in when we see the potential to optimize processes. The very positive feedback from the market was also confirmed by winning the Stevie Award Gold for the SCHOTT TOPPAC Nest 160 innovation. So we believe this approach has the potential to become a real game changer in the industry. Another milestone was the introduction of large volume ready-to-use cartridges for on-body injectors and prefillable polymer syringes for infusion of large drug dosages. Through these, we are making subcutaneous self injections much more convenient for patients, and at the same time, to lower costs for health care providers. And to further increase market acceptance for ready-to-use vials and cartridges and further boost our ready-to-use innovation, we launched the alliance for our ready to use together with Stevanato and Gerresheimer. This collaboration aims to improve efficiency, safety and product quality of ready-to-use innovations, while highlighting the advantages over conventional bulk packaging. So all these innovations directly enhance the value we bring to our customers. Our deep and long-standing customer relationships and comprehensive understanding of the pharmaceutical value chain made these achievements possible. Our market expertise enables us to provide customized solutions that precisely meet our customer needs. Now let us take a look at the developments during the last 12 months, the second pillar of our strategy, namely expansion. So on this map, you can see the global footprint with all SCHOTT Pharma locations. So we are present in all major pharma hubs globally. The dark blue points represent our existing locations, while the light blue points indicate where we continued to execute our expansion program in '24. So overall, adding capacity for the demanded products, particularly for HVS, is an essential driver for our growth. Highlights of our expansion program in '24, including Hungary, Switzerland and Serbia. As in the other locations, our expansion in Hungary progressed according to plan. So production of refillable glass syringes has started following the inauguration of a new state-of-the-art facility and final customer qualifications, the majority of these new capacities is already sold out, which means that we will see the benefit from this going forward. We are delivering on our steep ramp-up and additional line is already in installation starting this month. So with product qualifications and the installment of machines, our best cost site in Serbia has progressed as planned to a [ stadium ] close to commercialization, which is anticipated for early '25. Adding to this, we are expanding production capacities for ready-to-use cartridges in Switzerland and are soon implementing a significant additional increase. At the same time, we see a big potential in India. As you know, India is a very interesting market for all of us, and is said to become a manufacturing hotspots for the entire world. And we are accompanying this growth with significant capacity expansions, our prefillable glass syringes at one of our sites in India and are convinced to benefit off this expansion in the future. So regarding our activities in the U.S. We are also in the final phase to increase capacities for ready-to-use vials at our site in Pennsylvania and continue to finalize the planning for our site in North Carolina. In Germany, we added significant production capacities to produce specialty vials and as our specialty wiles used to store ADCs, we expect a strong increase in demand following the ongoing sampling processes. With that, I hand over to Almuth for a detailed review of our financials.

Thank you, Andreas. Also a warm welcome from my side. We are glad that you are taking your time today. I will now take you through our fourth quarter and full year financials in detail. As mentioned by Andreas, we are very satisfied with our performance. In the fourth quarter, we presented a strong year-end finish. Based on strong market demand, we were able to further continue our revenue growth trajectory while significantly improving our profitability. Let us take a closer look. In the fourth quarter, we achieved revenues of EUR 237 million, an increase of 4% year-over-year. At constant currency, we were able to grow our revenues even stronger by 9% year-over-year, slightly below the full year growth rate as expected. At the same time, our EBITDA soared to EUR 66 million. This resulted in a strong margin improvement of more than 5.3 percentage points to 27.9%, both reported and constant currency. The positive development was mainly driven by strong demand for syringes and benefits of cost savings in our Drug Containment Solutions segment. Against the backdrop of continued ramp of investments as well as seasonal weakness, we are particularly pleased with this achievement. In the fourth quarter, our capital expenditures accounted EUR 65 million, which declined by EUR 24 million year-over-year. This was mainly related to year-end timing of the investment push out in our Polymer business. The good year-end performance translated into earnings per share of EUR 0.23, nearly in line with the fourth quarter of fiscal year 2023. This strong fourth quarter results are the last building block of our successful performance in fiscal year 2024. I now want to sum up with key financials from full year on the next slide. On a reported basis, we recorded revenue growth of 7% to EUR 957 million. The EBITDA increased even stronger by 8% to EUR 258 million, resulting in a reported margin of 26.9%, which was above last year. In fiscal year 2024, we exceeded our original ambitions for revenue growth at constant currency and profitability. With a 12% year-over-year increase, we landed in the upper half of our increased revenue guidance. At constant currencies, our EBITDA growth was even stronger at 17% year-over-year, driving the margin to a record level of 27.8%. Again, I want to emphasize that this achievement is particularly remarkable as it included ramp-up costs for our expansion program. CapEx for the full year totaled EUR 145 million. I will update you with more details on this shortly. Finally, our earnings per share for the full year was stable at EUR 0.99, which includes higher D&A following our ambitious expansion program. Now let's dive into our 2 product segments and their developments. Most of you are familiar with the segmentation of our business. As usual, we update you on development of our drug containment solutions, short DCS, in the dark blue bar and of our drug delivery systems, short DDS, in the light blue bar. Our DDS segment includes exclusively high-value solutions, specifically including both glass and polymer prefillable syringes, which serve rapidly expanding markets such as biologics. The DCS segment comprises our core vials, cartridges and ampoules, as well as HVS products like ready-to-use and specialty wiles and cartridges. Looking at the top line. In the fourth quarter, our strong revenue development was mostly driven by the continued strong double-digit growth trajectory in our DDS segment. In total, DDS revenues increased by 12% to EUR 180 million, the highest ever quarterly revenue. This underlines the high momentum in our glass syringe business and is even beating last year's high revenue level. The DCS segment achieved revenues of EUR 190 million in the fourth quarter compared to EUR 126 million a year ago. However, adjusted for the FX headwinds, growth at constant currencies was even up 5% year-over-year. With this growth rate, we continue to see an upward trend in the segment. In addition, we are also seeing a continuous increase in our DCS order intake. Our strong year-end performance in both segments also drove our full year revenues to new highs. The strong demand for DDS resulted in revenue growth of 27% year-on-year to EUR 439 million. The DCS segment reported revenues of EUR 590 million compared to EUR 558 million a year ago. However, at constant currencies, DCS achieved solid revenue growth of 3% year-over-year. Following the gradual improvement in demand in core vials and continued growth in other product categories, we saw particular good dynamics in the second half of the year. FX had an overall negative impact of EUR 30 million or 5.6% of revenues in Q4. This was mainly in line with the full year development. FX headwinds were mainly related to the Argentinian peso, Hungarian forint and the Swiss franc. Now let's take a closer look at our EBITDA development on the next slide. As mentioned before, we are particularly pleased to have achieved strong profitability, both in the full year and in the last quarter. In Q4, EBITDA amounted to EUR 66 million. Compared to last year's period, this marks a significant increase of 28%. This was driven by high overall capacity utilization, which more than offset negative ramp up effects in Hungary and Serbia. Both DDS and DCS contributed to our improved profitability. With a 21% year-over-year increase, DDS EBITDA grew stronger than revenues contributing a total of EUR 45 million in Q4. This led to an expanded very strong EBITDA margin of 38.1%. This is an increase by 260 basis points year-on-year and the highest quarterly margin of the year despite Hungary ramp-up costs. The profitability in the DCS segment was positively influenced by the benefits from initiated cost measures. This resulted in a DCS EBITDA of EUR 17 million, up 21% year-over-year. Considering the ramp-up costs from Serbia, the DCS margins held up well. Looking at the full year, I gladly reiterate, we grew our EBITDA stronger than our revenues by 8% year-over-year, to EUR 258 million. At constant currencies, growth was even stronger, resulting in a record margin of 27.8%. Our growth, both top and bottom line was fueled by increasing high-value solutions revenue share, underlining the success of our strategic focus on expanding our product footprint. The DDS segment contributed EUR 166 million to our full year EBITDA. The resulting margin increased by 40 basis points year-over-year to 37.9%. The DCS EBITDA reached EUR 101 million compared to EUR 109 million a year ago. DCS shows an almost stable margin of 19.5%, while being impacted by ramp-up costs in Serbia and ongoing underutilization in vials. However, adjusted for FX, EBITDA would have been improved by 6% year-on-year and the margin by 50 basis points. Up next, I would like to give you some details on our cash flow and investments. Both in the fourth quarter and the fiscal year, our cash flow operating activities developed strongly. In fiscal year 2024, the cash flow from operating activities increased by EUR 44 million to EUR 225 million. The foundation for this was our good EBITDA performance and net working capital improvements. This means that we continue to fully self-fund our future growth, namely our investments into the strategic expansion of our capacity. Our cash flow from investing activities in the fiscal year 2024, amounted to EUR 146 million or 15% of our revenue. Again, the majority of these related to CapEx for our growth investments. As expected, the largest quarterly share of our investments took place in the fourth quarter. Still, our total CapEx was around EUR 20 million below the lower end of the projected range for the full year. We approach our capital expenditure with a clear plan in mind but maintain the flexibility to adapt to market dynamics. In this case, year-end timing and timing of received subsidies resulted in lower CapEx. We stick to our growth strategy based on investments in our expansions, which you will see in our updated CapEx projections for the next fiscal year. Before we get to that, I want to present to you our achievements in a very important area. Let's take a look at our ESG progress. We firmly view our commitment to sustainability in our business as a top priority, closely linked to our success today and particularly in the future. Some of you might recall our 3 overarching goals in this area. SCHOTT Pharma aims to achieve climate neutrality in our production, pioneer sustainable solutions for the pharma industry, live its mission through committed and diverse workforce. Throughout 2024, we continue to drive progress along these fields of action. Let's start on the last stage. We firmly reinforce our commitment to align our climate actions towards the requirements of the Paris Agreement. This includes the certification of SCHOTT Group's climate action road map and the targets by the independent SBTi. We are putting this commitment into action with our decarbonization program. In the first phase, we switched to green electricity. And now in its second stage, it is focused on reducing our supply chain emissions. Throughout all business operations, we focus on fostering partnerships that includes our ESG efforts. We are proud to be recognized by our partners as a pioneer in sustainability being invited to speak on how to transform the industry. On top, we again received the EcoVadis Gold sustainability rating. In the latest assessment, the SCHOTT group moved from the top 4% in 2023 to an outstanding top 3% of all companies righted worldwide in 2024. This transformation is not only driven by a change in mindset, but by constant technological innovations. Together with partners, we drove several initiatives in 2024 that will help achieve more circular, more resource efficient supply chains. These included large-scale studies, product concepts and product improvements that are market ready. For example, one of our newest innovations is a blister-free syringe concept that reduces packaging waste and CO2 footprint with the blister coverage combining various elements. With this, we simplify the entire value chain and generate benefits for transport efficiency and environmental impact. Finally, we continue to strengthen SCHOTT Pharma's role as an attractive place to work for diverse and highly committed team. Once again, we are proud to share our continued strong employee commitment of 83 which is further underlined by a very high participation rate of 91%. Also, we continue to promote gender equality and in fiscal year 2024, 24% of leadership roles were held by women. And again, we maintain that women and men are equally represented on the Management Board and Supervisory Board. Before I hand back over to Andreas, I would now like to proceed with our view on 2025 and present to you our financial guidance. We want to continue our trajectory of profitable sustainable growth. This is our first and foremost priority. Given that we have achieved the upper half of the raised guidance in fiscal year 2024, we start from a higher reference point for 2025. We are convinced that all major pharma trends that fuel our growth remain intact. Therefore, we will continue to execute on our growth projects. Considering the higher reference point in 2024, we project a high single-digit revenue growth at constant currencies for our fiscal year 2025. This reflects that we do expect a year of versatility in 2025 that also includes short-term volatilities. Let me point out a few drivers for these assumptions. In DCS, our considerations include, among others, ramp-up of our production volumes for ready-to-use cartridges and the continued demand recovery for core vials. In DCS, we expect revenue growth to come from additional capacities in Hungary as well as the continuation of high demand across our broad customer base in product portfolio and particularly in glass syringes. Looking at profitability, 2024 was a very successful year with a very strong year-end finish in a tough environment. Therefore, we strive to achieve an EBITDA margin in fiscal year 2025 at approximately the same level as the last year, of 26.9%. The additional margin from higher revenues balances the continued cost for scaling up our capacities and the negative product mix impact. I'm also glad to reconfirm our midterm outlook as we foresee stability in the long-term demand based on major pharma trends. That means that we continue to target a revenue CAGR of above 10% and an EBITDA margin in the low 30%. Beyond our guidance, we want to also comment on additional other financial figures. We continue to foster the expansion of our HVS revenue share and confirm our midterm target of above 60%. However, as indicated before, in fiscal year 2025, we will likely see higher short-term volatilities, for example, in our polymer syringe business. We therefore foresee a stable HVS development in the next fiscal year. In addition, we will continue to significantly invest in our growth. Our plan includes projected capital expenditures ranging between EUR 160 million and EUR 190 million. We will continue to focus on growth investments, particularly to expand our HVS capacities. At the same time, we want our shareholders to continue participating in the success of our company. Following the proposed dividend hike for fiscal year 2024, we again aim to pay out between 10% and 20% of our net income. With this, I conclude our financial update. I will now turn it over to Andreas again before we start the Q&A session.

Okay. Thank you, Almuth. So after Almuth has shared the figures and the outlook for '25 and the midterm. Let me share with you some thoughts on how we position ourselves and the exciting and challenging market environment. So our growth story is strong, particularly in the long term. We operate in the highly attractive and fast-growing market of injectables that is outpacing the already strong pharma market. This and the fact that all the major market trends that drive our growth are well intact, give us confidence. We will face many growth opportunities for SCHOTT Pharma. With our broad portfolio, our strong relationships with all pharma players and our unique power to pioneer innovations and execute our strategy alongside trends, we're in a great position to see so. This is why we remain very confident about our -- continuing our growth trajectory in the short and in the long term. Of course, this growth path will have different stages after a very strong year. We're also facing a new market environment. From our point of view, 2025 will be year of volatility. Looking at the market next year, we are aware of challenges and the general environment that may appear. We are well prepared to face them. But let me explain what I mean. For the coming year, we expect less predictable demand patterns and a certain level of volatility in demand. This is also stated by various forecasts across the industry. Accordingly, we also take a cautious approach to our projections, as Almuth explained earlier. The market environment will likely arise across products and those segments. We expect that strong demand for certain products will continue. One example of that is that we expect an ongoing momentum for prefillable glass syringes for GLP-1 therapies, the demand will probably exceed the market supply. This will drive the growth of our DDS business. For SCHOTT Pharma, we also expect a similar dynamic for our ready-to-use cartridges, with also the male market will likely continue to see increased demand. On the other hand, we expect to see free capacity in the market of polymer syringes. 2025 will also be a year of ramp-up for the near future, several major therapies and technologies approach wider commercialization. We expect a year in which we lay the foundation for strong future growth, while simultaneously aiming to see short-term opportunities that will arise. Looking at our portfolio, we are in an ideal position to benefit overproportionately from the GLP-1 market, for example. This stems from multiple long-term contracts we have signed with the main players in this field. We also see further progress in the market adoption of ADCs with hundreds of clinical trials ongoing, 3 new therapies against breast and lung cancer are poised for approval in 2025. And as mentioned earlier, we are ideally positioned and already in the sampling process with over 50 companies in this field. On top, we see potential in the stronger commercialization of our ready-to-use wiles portfolio, for the cartridges and large volume syringes that are used in home care solutions. To sum it up, in order to continue our growth, we will continue to execute our well-established growth strategy, as you know it, with a focus on partnerships, innovations and the expansion of capacities. We will expand our HVS revenue share and grow profitably. In short, that means we stay true that to what we have told you and at the same time, make use of our ability to adapt to the environment where necessary. This translates into our priorities which are presented on the next slide. So first and foremost, our priority remains to continue our profitable growth path along our guidance. Our strategy in accordance with our strong market position will enable future growth. For this, we have already laid the ground. We have expanded our new business pipeline with several big multimillion contracts signed across a broad customer base and product segments. Secondly, we were very successful in expanding our HVS revenue. As of '24, we have reached 55%. We target this benchmark for the upcoming year as well. Furthermore, innovation is at the core of our DNA and along with mega trends at the core of our future growth. We maintain this focus to further expand on our pioneering role and to continue to provide industry with cutting-edge solutions needed for next-generation drugs for their value chain efficiency. So next year, R&D pipeline will, among other areas, focus on large volume solutions and further strengthening our EVERIC portfolio. Fourth, we will continue our expansion program again focusing focusing on enabling HVS growth. So we will pay special attention to glass syringes and dry [ reuse ] cartridges. In 2025, this means ramping up our capacities in Hungary and Switzerland. Additionally, we will expand our production capacities in India, increasing our glass syringe capacity by a factor of 3 to meet increasing regional demand. And in Serbia, we will start commercial supply in the coming year which will significantly increase our level of competitiveness in the core market. Overall, increasing our global footprint remains a priority and cornerstone of our strategy. So finally, we continue to drive progress on our sustainable operations. We have taken on a role as a sustainability pioneer within the industry and pledge to continue our ESG efforts with a variety of initiatives. This year's reiteration of our commitment to the Paris Agreement underlines it, alongside our model becomes human health matters. So with that, I would like to end to this presentation. Thank you all very much for your attention, and we now look forward to your questions. And Tobias, please take over.

Thanks, Andreas. Thanks Almuth. Alexander, our operator, will help you with the registration for the Q&A, and then we can start. Alexander, please go ahead.

[Operator Instructions] Olivier Calvet from UBS. Sorry, I am experiencing some technical issues here. Just a second, please.

It's Tobias again, I see the list, but I cannot bring you in. So Olivier would be the first from UBS. I hope it works technically.

So let me just see, I had a power outage here. So just one second, I will be right back.

First question from Olivier Calvet, UBS, please.

Yes, Okay. Great. Just before I start, are we okay to go over the hour because I have quite a few questions. So I don't want to -- is that okay for you?

With pleasure. Yes. I hope it's fine for the other.

Okay. All right. So just the first one would be on the vaccine impact. I would be interested in hearing your thoughts on how the incoming U.S. administration might have an impact on the prospects for -- on the injectable market? That would be the first one. Then in terms of the vial destocking comments, I'd be interested if you could shed more light on the comments you made on order intake accelerating. Since when have you seen this? And could you perhaps shed some color on the regions or customer segments where you're seeing this order intake acceleration? Then just on the full year '25 guide, you tell me if I need to take them one by one. But I was just wondering if you could further comment on the DCS versus DDS segment growth next year. You mentioned a negative mix impact. So I was just wondering what we should think there? Or if we should think if the current quarter with, on my math, low single-digit DCS growth at constant currency and high double -- low double-digit DDS growth would be a fair sort of proxy for next year? And then just some nuts and bolts, which I'll just ask in case there's any other technical issues -- on 2025 earnings. So you had EUR 10 million to EUR 15 million ramp-up costs in 2024. Could you quantify the ramp-up costs you expect in the 2025 EBITDA guide? Second one, one still on earnings. You have this take-or-pay contract that is well known. Could you perhaps comment on the magnitude of the support we should expect from that contract in full year '25 and what it was for earnings in full year '24? I have another one, but I'll stop there.

Okay. First one is vaccines. Almuth, if you want to take that. Our exposure to vaccine -- vaccination in general globally is about 20% -- more than 20%, yes. So of course, we are observing the situation in the U.S. and what it means. But on the other side also, there are many variables at the moment because we have, on the one hand side, probably the new Minister of Health and then of course, other people in the administration, we are discussing tariff topic and so on. And so what we believe that the impact on us is not big in '25, not big because U.S. is only representing one piece of it, of the global demand. So we don't expect much but, of course, we look carefully at it. Yes. Then next one is about vials and order intake. As order intake since a few months is positive, higher than 1. So when we -- in the past, we commented already on it as we see really very different behavior of customers in the regions. We can basically say India, for example, is very well developing, it's probably the best with double-digit growth now in vials. U.S. is recovering, which is good. Yes. And Europe is still a bit slow in recovery. But all in all, it will get better. What we don't know is, and that's something we have also said last time already. So we have only visibility of 2, 3 months now until other POs are placed now because the lead times have reduced so much. We cannot give you a really number for '25 in total. Of course, we have huge contracts, but there are many customers behind. So let's see that one wiles. And then the next one was about the mix impact on DCS, DCS is something I would hand over to Almuth.

Yes. Perfect. I will take that one. So if you look at the segment development, you will see DCS with a stronger growth profile next year than DDS because in DCS, we have, on the one hand, the additional growth coming, for example, from our sterile cartridges, additional capacities which we are ramping up and the continuous recovery as well in the core vials, the ongoing growth in all the other areas. In DDS, we have more big picture. Because on one hand, we have the back-end loaded growth for the fiscal year '25 coming from the additional capacities for glass syringes in Hungary. And on the other hand, we have a lower demand for polymer syringes next year. So overall, it has a very slight growth in the segment next year, but there is a mix impact from the shift of having no glass syringes but less polymer syringes in the overall figure included. And if you -- then coming to your question of the ramp-up costs, we expect ramp-up scale-up costs next year at a similar level what we have experienced this year.

Then take or pay, perhaps I comment a bit. I cannot tell you -- it's a precise number for '25. I just don't have it in mind. What I can tell you is that we have been able to sign new additional contracts, huge contracts which are financed by customers.

That's actually interesting. I also wanted to -- sorry, a follow-up on also that comment where you said there's multimillion contracts you've signed. Could you just tell us roughly the timing of that and whether it's in the GLP space or outside of it?

It's both, but it's a huge portion. GLP, timing is long because that is really long-term contracts, which we are closing. And the longest that I remember is until 2034.

Sorry, I meant when did you sign this? Was this since Q3 or...

That was Q4 mainly.

The next might be Curtis from BNP Paribas. Is this correct?

Yes. I just have a couple here. The first one is on the guidance for 2025, looking at the EBITDA margin. I just wanted to better understand what's kind of baked in here. Are you expecting first off, any kind of difference between CC margins and reported margins? Is there some kind of FX or hedging impact? And then is there maybe a little bit of negative pressure coming from this mix effect that you were just talking about? Or maybe just a little bit more color there would be helpful. And then on the revenue growth guidance, I wanted to get a better idea in both DCS and DDS, are those both expected to be back-end loaded? Or maybe is DCS expected to be a little bit more stable throughout the year? Any additional color would be helpful.

Thank you for your question, Curtis. So let me start. In terms of our EBITDA margin, what we forecast for next year, we have not considered any FX impact for our EBITDA for next year. We do not know how things will develop, and therefore, that is definitely not included. We assume at constant currencies and as reported figures would not have an impact on our EBITDA. In terms of the negative impact coming from the mix, overall, HVS has a higher margin than the core business. And within HVS, we said that polymer has a slightly higher margin than other parts of this -- which are part of HVS. And by this one, having less sales in polymer having more sales in other product groups independent of being HVS. And in addition to having additional growth as well coming from the core area results in a negative mix impact by nature.

I take over for second half or first half, yes, we are a little bit more backloaded because we have the steep ramp-up in our Hungarian plant for the glass syringe piece. So that will be more in second half of '25. As you know, we are already in production. We are in qualification with customers and it's all running. Next line is coming and already under installation and so on. So all positive, but back-end loaded, yes. And then we have the other big growth driver will be reuse cartridges, that is very much the same. We are also here ramping up steeply and that will also be more second half than first half. A more back-end loaded '25.

Next question comes from Falko, Deutsche Bank.

My first one is on that sentence you mentioned at the end of your prepared remarks that you expect demand volatility and a more cautious market sentiment in '25. Can you add a little bit more flavor here in terms of what exactly you mean? My second question is on your mRNA exposure. Is your one large customer that is still sourcing these polymer syringes, are they still signaling a full commitment to stick with the polymer syringes going forward? And my last question is on your polymer business more general. Can you remind us on where these products are used outside of mRNA vaccines, and how diversified your customer base is outside of these mRNA vaccine players.

Thanks for your questions. The volatility we see indeed in the polymer business is basically the mRNA piece, which you have already touched also with the second part and your third part a little bit. So that is one area. And then the other one I explained already before, we have not seen full year visibility in the vials arena due to the short lead times. So that is something. And then, of course, we have the U.S. things, which whatever happens with the tariffs, we really don't know today. So more volatility from our point of view and you know us a bit, we are more on the safer side. So then mRNA exposure of the active customer for polymer syringes, of course, we are in very close contact, according to what I know, no changes. And then the last one is polymer. First, I want to remind you that all our polymer investment decisions were made before mRNA was so prominent there. So we are really looking into the other drug therapy fields as before, which we have braked a little bit in between because mRNA demand was so high. And that is, of course, something we are fully revitalizing. For example, drugs for mental health, there's a lot on its way. One example, operating environment, surgery rooms, there's a lot on its way, but it takes a little bit of time to get it fully back on track. But certain other areas, everything -- of course, what I forgot also what is interesting is everything which is related to large volume syringes like subcutaneous and so on and so on. So there are many fields we are now addressing again, and we have already also for us positive feedback in that area. But it takes a little bit of time. Pharma is not so super fast. It's good and in this case, not so good. I hope it answers your question.

Next question comes from Victoria Lambert from Berenberg.

I'm sorry if you've already answered this, but I might have missed it. In your presentation, you said you won additional GLP-1 contracts. Could you give a bit more color on which product areas this is? Is it more syringes or more cartridges? And then does that change your cumulative contract revenue amount that you've given before, about EUR 1 billion? That would be the first question. And then the second question is just if Trump was to put tariffs for production outside of the U.S., what impact would this have on your syringe business? And when would you be able to produce locally?

You want to take it?

Yes. I'll take it. So in terms of the GLP-1 topic, which you mentioned, it's not only 1 contract, it's 2 contracts which we signed for GLP-1, and this is related to bulk and sterile cartridges. And as you already indicated, this has a positive impact on the accumulated sales, which we have already contracted for GLP-1. That is definitely true. It has been significantly increased.

So why don't I take the second one, Trump syringe business. So far, we don't know how that will develop, to be honest. At the moment, the discussion is about Mexico and U.S. and Canada, of course, and not Europe. But you never know. And as long as it stays like it's discussed today, there is no impact because we are not exporting from Mexico to U.S. as a no syringe business and because our syringes are produced, as you know, here in Switzerland and Hungary and in [ Wilheim ] in Germany. So hopefully, there's no impact. And as we also said and stated, we will ongo with our planning for the North Carolina site, but we are not under pressure to make decisions now from our point of view, which is good because we are well positioned. We know what we do and everything has realizing our strategy. But of course, if there are other decisions made, which we all don't know at the moment, we have to include that into our strategic discussions.

So next question comes from Julien of Bank of America.

Falko's question. So I mean, do you confirm the mRNA cumulative guidance for the, let's say, like for the mid- to long term? I think you mentioned EUR 700 million in the past. And you mentioned also the fact that you basically get outside of mRNA at the moment. I mean it's still early stage. But could you give us a rough split for your product mix between application for the like mid- to long term? I mean how big mRNA will be versus like all the new applications that you mentioned? The next question is, can you maybe help us, I mean, providing a bit of trend that you're seeing in Q1, so October to December. And you mentioned a back-end loaded guidance, but will you be still within the guidance in Q1? And the last question is just on CagriSema. So we will probably have a lot of news in the -- let's say, like in the coming probably days. But I mean, do you have like the dual-chamber syringe technology? And could you change your mind and trying also to compete in this tender going forward?

You want to start?

Yes. So in terms of mRNA, we are still happy with the volume or value which we communicated initially. And there are further applications for polymer syringes, which are absolutely there and had been there. There could be large volume syringes for subcutaneous injections. It could be for applications in the operating room. It's for break-resistant syringes or, for example, if you have high viscosity of drugs. And they are all in place and they continue to be there. And overall, we said mRNA is approximately 10% of our revenue, and that gives you an indication that it is a big piece of our overall polymer syringe business, but it's by far being everything what we have in polymer. So this to that one. And then coming to your Q1 question. Overall, our growth is back-end loaded. That is definitely true. If you look to the topic of having not fully utilized capacity in polymer syringes, this already starts for the full year. So we will have a lower Q1 and then we will see the growth carrying with a positive topics in the second half. So we have a bit of mismatch between, let's say, the downside and the upside. For overall of the year, it's still an upside, but the upside is in the second half and the downside is more overall in the year included.

If I may add to that, we have also, of course, forecasting system, but not guidance for us. And Q1 will be in line with our forecast as what we forecast internally. Double chamber, no, we have no intention to enter into it because we have still the same opinion as before that we are not believing in the long term of double chamber. Of course, we could do it if you want, but we don't want, yes, as we are not engaged in that one. But of course, we are participating the big tenders for glass syringes.

Next question comes from Chris Richardson from Jefferies.

Please, can you just give some quick insight into what level of HVS vial adoption is assumed in the guidance for 2025 given the arguably slower industry growth we've seen there. And then what the relative profitability is versus syringes?

It's very detailed, I don't know it. I cannot answer it. It's still a minor part as we are shifting the vials more towards HVS. And of course, we will have -- we will experience big growth in ready-to-use vials, that is relatively clear. And also -- but I don't know the precise number and the same is true for our special vials, which I explained already during the presentation as we are assembling a lot for ADCs, for example. And we see already an increasing demand and good numbers for our HVS part in vials. But I don't have the millions estimate in mind now.

If you don't mind, if I may add there for ready to use vials. So far for us, it's more a business where we do sampling or in place where we deliver to compounding pharmacies. We now have a third large scale order, which will contribute to the growth in this area, but it's not -- definitely not the major growth driver next year. But it contributes to our overall growth. That is definitely true.

Just on the versus range profitability? Or is that number also not -- sorry?

Sorry, I forgot that one. Overall, the profitability, if you come to ready-to-use vials at a larger scale, this is commercial order, it's approximately at a similar level as for a syringe. If you look at sampling, where we just deliver those small quantities, then obviously, we have a different margin because it's not yet in already fully commercial scale. But once they are coming to the similar -- they are on approximately the same level.

Next question and last question comes from Ed Hall from Stifel.

I had a bit of technical issues before. So I apologize if this question has already been asked. But could you just talk about the decrease in absolute EBITDA that you expect in the DDS segment '25? How much of this is related to product mix dynamics and how much is related to the ramp-up you see in Hungary? And I guess, to follow up to that question, when would you expect the Hungary ramp up to finish in the year? And then my second question would be just on the increase in order intake in DCS in 4Q. Could you just talk about lead times at the moment you see across your different product categories? How has this changed since we last talked in September? And then any color on sort of a percentage of sales that are associated with shorter-term contracts, contracts that are signed and booked within the fiscal year? That would be great.

Thank you for your questions. Let me do the first one. We do not see a decrease in absolute EBITDA in DDS. What we said is that we have seen in the EBITDA margin, we see a reduction due to the mix, but there's still an EBITDA development in this segment as well, considering that this segment is well growing. And we assume that overall, our similar level between the 2 years, it's not only overall for pharma, but as well for the segments if you consider ramp up and scale up costs together.

I just wanted to comment, just because in the annual report, it says the Delivery System segment is expected to see a slight and temporary year-on-year decrease in EBITDA. So I just want to double check that the wording in the annual report, is that mentioning EBITDA margin? Or is this mentioning absolute EBITDA? Just want to make sure I get it right.

You're right. It's slight absolute decrease.

Okay. Perfect. And then just -- just so I get this right, it's -- this is more related to sort of the product mix dynamics than the Hungary facility.

I'm not sure if I really got that.

Ramp up itself is at a similar level as last year. So there's not a big difference. And the impact of this one is driving that mix more on glass syringes and we have less polymer. And the margin is higher than the margin in the glass syringes.

Of course. And then yes, just sorry, lastly and quickly, just on the DCS question, the lead times, any differences you see there versus we saw in September? And then any sort of updated views on the percentage of sales tied up in short-term contracts.

So what we have in the core piece, that is more shorter term, in general, you can say. Many customers behind of neutral demand. So that is, yes, that is something we have experienced also before COVID when we had enough capacity to supply shorter lead times in a [ global ] change. Of course, we got used to it to a certain degree. And -- but that is today, I would say back to before, as shorter lead times for ampoules, normal cartridges, normal vials. So that's one. And then we are talking about HVS products like, for example, ready-to-use cartridges. That is more long term, that's more comparable to our syringe business, where you close also big contracts because we have to do all the market after...

There's another one coming in. Olivier has another follow-up question from UBS.

First one follow up, just to confirm, you said because acoustically, the line wasn't great, you said the DDS should be seeing an absolute decline in EBITDA, as you say on Page 36 of the annual report, just to confirm that. And then I just had a -- is it yes?

It's a yes, it's an absolutely decline and a relative decline.

Okay. Okay. And then in terms of just a few follow-ups on FX. You have about EUR 11 million losses in other OpEx. I just wanted to confirm that those are booked in the consolidation line when you look at the segment breakdown. And also bearing in mind the you should have still an impact of adverse FX in calendar Q4, so your Q1. Could you give us a sense, if possible, of what to expect there, specifically, if you already have that?

To give you already part of the answer, we are -- it's absolutely true that this impact you mentioned of FX is booked under consolidation. That is true. For this year, in the first quarter, we see certain impact, definitely not at the scale of what we have experienced beginning of last year. So that is luckily over. And -- but it's too early to communicate already what we expect for the full fiscal -- for the fourth quarter given that we might have big impacts from one month itself. But at the moment, we are happy that our adjusted strategy in terms of it is in line with what we have been able to achieve in the past.

Okay. And then just a couple more. Maintenance CapEx, could you just confirm the level of your maintenance CapEx, what it was in 2024 and what you expect it to be next year? And then just more general, I don't know if you can comment, but are there any thoughts you could share on the intentions of your main shareholder, are they happy with their current ownership level? Any specific investment plans that they have that might need some specific cash inflow from your side. Just wondering there.

In terms of our maintenance CapEx, it still sized on the level which we have previously seen was between this 2% to 3% of our revenues being maintenance CapEx. And in terms of our major shareholders, have we any plans or any demand of additional cash, which will have an impact on our shareholder structure. We are not aware of any updates on this topic.

We're getting closer to the end. There's one more on line, Julien again from Bank of America.

Just a very quick follow-up from my question on Q1. I'm just not sure I fully understood. So you said, I mean, like lower Q1 and then growth coming in H2. I mean could you confirm, do you still expect some growth in Q1, but like potentially below the high single-digit guidance? I just wanted to be sure.

Julien, no, we do not expect the growth for Q1 because the growth which we foresee for the overall year is back-end loaded, and we have the negative topics with lower demand in some of our product fields, which are already starting from the beginning of the year. So -- and there will be no growth -- will be negative growth in Q1 foreseen. And during the year, growth CapEx topics are coming in, we will see overall the attractive growth, which we guide but not inn Q1.

And I mean because you mentioned acceleration in 2H. Does it mean also Q2 will be negative or like roughly flat but naturally growing?

So overall, we will see the biggest impact definitely in H2. For Q2, it's a bit too early to finally put it down exactly because we are very much depending on how our glass syringe production in Hungary will finally happen to be able to first sell. So we said probably early H2 or end of Q2. So depending on what is the final timing on that one, we will be able to either see already more growth in Q2, but that's nothing what we can update now. So probably in our next quarterly call, we would have a better idea how far our customers are with giving us the possibility to already sell glass syringes from Hungary in Q2.

Thank you very much to everyone for your interest in SCHOTT Pharma today, for your time today, and especially including your patience for the technical gaps. This concludes our call for today. We are looking forward to meeting you in person in the upcoming road shows and conferences, be it in London, Frankfurt, New York, Toronto, Denver or San Francisco. Also on behalf of Andreas and Almuth, Tobias, [indiscernible] and the whole team here, I wish you a great end of the rest of the day, a Merry Christmas and a very happy new year 2025. Thank you, and goodbye.

Thank you.