Semperit Aktiengesellschaft Holding (SEM) Earnings Call Transcript & Summary

Thank you very much. Good afternoon, ladies and gentlemen, and welcome from Vienna to our results presentation for the first 9 months of 2021. With me on the call today is our Chief Operating Officer, Kristian Brok, who has been on the Executive Board since 1st January 2020 and will take us through the operational highlights. Kristian will say a few words for personal introduction in a minute. As the CFO of this company, I'm very pleased to be able to drive forward our Industrial strategy as well as the further growth of the Semperit Group together with a very experienced industrial experts. So let me go straight to Slide 3, where we highlight the major developments of this year so far with a special focus on the third quarter ending 30th September 2021. We are very proud to announce that we have produced another record result for the first 9 months despite severe headwinds from raw materials and logistics. Along with the post-corona global economic recovery, our Industrial sector achieved also a strong order book recovery. Against the backdrop of a demanding-sourcing situation and supply chain constraints mainly due to limited container availability, this is an outstanding performance. We have further proactively introduced price increases for our product. Thus, the results have started to convert towards the strong pre-corona level. At the same time, we are still able to reap benefits from our previous restructuring and operational efficiency program, which hugely helps at the time of certain costs for raw materials, energy and logistics. Another example is our proactive working capital management where the relative ratio of trailing 12 months revenues has actually improved again compared to both 2019 and 2020. The record turnover as well as the measures implied leads to a comforting cash level of EUR 286 million cash and cash equivalents, including the U.S. dollar time deposits. This also brings us right to our strategy for which we already announced a few weeks ago a continuation of the previous course with full speed. Let me also be absolutely clear at the outset, both Kristian and I are fully determined to implement our strategy with full force and are now focusing on disciplined execution. At the same time, we both can fully rely on the support of the Supervisory Board. The crucial element of recent outperformance has been the exuberant demand for protective gloves right after the outbreak of the corona pandemic. This has led to massive price increases, which started to weigh in the third quarter, and we witnessed now in Q4 already an accelerated price decline. This leads me straight to the update of our EBITDA guidance for 2021, which we had first announced in March and maintained for most of the year. Despite the massive headwinds from raw materials, energy and logistics, the EBITDA at year-end requires even now only a slight adjustment. We expect the EBITDA at year-end 2021 to be single-digit percent below the original target of EUR 395 million. From our perspective, this is an enormous achievement given the extremely challenging environment, and we would like to thank all our colleagues at Semperit for such an outstanding performance in extremely difficult times. Over the page at Slide 4, we provide the headline numbers for revenue and EBITDA for the first 9 months 2021 in comparison with the 2 previous financial years. The combination of a still strongly performing Medical sector, up by 79% year-on-year despite declining ASPs, average selling prices, and a very encouraging recovery of the Industrial sector resulted in a record top line growth of 41% to EUR 926.1 million. Even more important, group EBITDA produced an outstanding margin of 35%, and this is against the backdrop of a deteriorating economic environment, intensified by the growing challenge of labor shortages, higher wage demands and general inflationary pressure. The strong EBIT of EUR 290 million converted into high free cash flow, which gives us a more than solid financial basis to remain focused on both nonorganic and organic growth. Given the exceptional circumstances in the operational environment in Q3 2021, we thought it would help to provide a bridge for EBITDA with the main moving parts on Slide 5. Clearly, the price effect of plus EUR 311 million was the driving force of the 174% year-on-year increase in EBITDA. But you can also see to what extent, limited container availability resulted in lower EBITDA, notably for Sempermed. Even more significant was the impact of higher raw material prices, reducing year-on-year EBITDA by EUR 77 million. In comparative terms, changes in cost for energy, logistics and personnel expenses were so far negligible at group level. With this, let me hand over to Kristian to take us through the operational highlights before I come back to discuss the financials and the outlook. Kristian, over to you.

Thank you, Petra, and good afternoon to all from my side as well. It's a pleasure being able to present to you these operational highlights for the first 3 quarters of this year 2021. As you know, Petra already mentioned, I've been with Semperit for almost 2 years. But since this is my first time in this setting, I just have a few words to myself. My professional background goes back over 20 years of various managerial positions in high-specification manufacturing and engineering business, 10 years of which I had spent at competing companies. In this capacity, I was in charge of different legal entities in both Americas, Mexico included; China, India and Europe. And my experience of which is definitely, I see, helpful in the globally acting Semperit Group. But enough on that. So let's move to Slide 7, where we present the revenue and the EBITDA numbers for the Industrial sector over the past 3 -- past -- last 3 years. On the revenue side, we increased the top line growth by 11% year-on-year, but we still not have fully recovered to the comparable quarter 1 to quarter 3 2019 numbers. However, headwinds from raw materials and logistics increased margin pressure, which we only partially managed to offset through proactive price adjustments, and those come into effect only after a certain time lag. Even though that we are applying a lot of focus on it, there is and will be a time lag. As Petra highlighted earlier, our previous restructuring efforts certainly helped to make the Industrial sector more resilient. As a consequence and in terms of EBITDA, we made consistent improvements over the last 4 quarters, which, for the third quarter 2021, exceeding the absolute number over the same period in the last year. On Slide 8, as I just touched on raw material headwinds, let me just spend a minute to illustrate recent price development for major input or components in our products. There are some key observations for all 3 of them, butadiene in Europe, fuel oil and wire rod. Firstly, prices started to increase in the second half of 2020 and then surged, I mean, almost exponentially since the third quarter. Secondly, prices slowed down in the fourth quarter with butadiene especially in Korea, even declining and growing below the -- and going below the level of January 2021. And thirdly, the scope of the sudden price increases in the first half of 2021 with vendors. And for the time being, they remained at elevated levels. The outlook on this is, like everybody else, see it's really volatile. Over the page. Turning to the segmental analysis within the Industrial sector and starting with the flex hose business. Revenues were up by 18.7% year-on-year, EBITDA also exceeding the levels of the previous year. At Semperflex, we witnessed not only growth recovery gaining momentum but also a strong operating performance with a 19.3% margin coming close to its benchmark for the same period in 2019. At the same time, we keep closely monitoring our major cost drivers for raw materials, for logistics, for containers, as we do for the actual availability of all other key components that driving cost in the business and actually engage with our customers on price adjustments. In this context, the continuously growing order book supports our optimistic outlook. On the next page, you see the results of our conveyor business Sempertrans, the on-hand characterized by being a late cyclical business and on the other hand, in addition, currently, also being affected by margin pressure. Revenues were down by 12.2% year-on-year and EBITDA declined by 25.7% as we still face a low utilization rate and a negative volume effect. Now recurring effects might have actively improved the EBITDA trend, but we are fully aware about our ongoing price pressure for raw materials, energies and -- energy and logistics. And at the same time, the nature of the project business provides limited scope for price adjustments. Even though we can see the project pipeline filling up, giving an improved order book with first signs of market recovery, as we had outlined in first -- outlined at half way results in August, Sempertrans continues to receive highest management attention for myself and Petra in combination. If we turn to Semperseal on the next page, Semperseal showed by far the strongest improvement this quarter as revenues were up by 20 -- almost 28% year-on-year and EBITDA exceeding both comparable third quarter results in 2020 and in 2019 with a strong 12.6% margin. Semperseal currently benefits from megatrends and infrastructure investments with strong demands coming from machinery, electronics, chemicals, resulting in a strong order book and further market share gains. At the same time, ongoing price pressure on costs for raw materials impact the operating result. Although in this segment, we managed to introduce new price increases in a timely manner, which has supported the positive margin development. As shown on Slide 12, Semperform achieved top line growth of 8% year-on-year with notably handrail and special engineered solutions exceeding the comparable period of 2020. Especially in railway and piping and household industries, we were -- we saw this growth. During the quarter, the strong order intake has resulted in growing order book exceeding the level of Q1 to 3 in 2020, so the comparable period of time. In turn, EBITDA declined by 20% over the first 3 quarters of 2021, which was particularly due to price pressure from raw materials and logistics, but also a lower share of high-margin business related to skiing tourism. Finally, on Slide #13, Sempermed had another outstanding year-on-year revenue increase by 79%, almost 80% whilst EBITDA more than quadrupled from EUR 67 million in the first 3 quarters of 2020 to EUR 277 million over the same period of time this year. By any means of comparison, any historical comparison, these are still record results and the rates are really staggering. However, prices for protective gloves have clearly reached their plateau earlier this year and they have started to decline in the third quarter of 2021, with the further acceleration of prices seem to be evident for fourth quarter '21. In addition, sales volume came under pressure due to the enhanced movement control orders by the Malaysian government in July due to COVID-19 infection rates. This was further aggravated through limited container availability, which resulted in a higher inventory buildup during the quarter. On the positive side, our operational excellence program led to an OEE, so an uptime of our systems of more than 90% that is really -- that is outstanding performance. And that was despite all the headwinds that was in the continued above-average demand for examination and surgical gloves. And with capacity is well booked into way, way into 2022. With this, I have come to an end of my presentation and hand back to Petra to take us through the financials and the outlook, please?

Thank you, Kristian. And we continue at Slide 15 with the year-on-year revenue numbers. There is no doubt that the Medical sector was still the driving force behind our record top line, contributing additional revenues of EUR 228.5 million to a total group revenue of EUR 926.1 million in Q1 to Q3 2021. As our management focus is primarily on the future of the Industrial sector, I'm very pleased about this exaggerating 11% year-on-year increase in revenues, with Semperflex showing an impressive top line growth. In terms of relative improvement, as Kristian has already said, Semperseal is the best performer this time. All 4 industrial segments together produced an additional EUR 40.4 million over the reporting period, which is absolutely going in the right direction. On the next page, when applying the same analysis for EBITDA, Sempermed clearly managed to convert its high top line growth into an impressive EUR 210 million EBITDA increase. This amounted to 86% of group EBITDA over the period and was the backbone of our operational profitability against all the headwinds in raw materials and logistics. The 53.7% Sempermed EBITDA margin was the main contributing factor for the record of 35% group EBITDA margin. So we would expect this to get increasingly under pressure given not only falling average selling prices in Sempermed, but also higher inflationary pressure and continuing supply constraints. Turning the page. We present key financial KPIs for the first 9 months 2021 in comparison with the same period in 2019 and 2020. Two observations from this chart: Firstly, the improvement in financial performance over the last 3 years are exceptional and result both from our previous restructuring efforts and the corona-driven excess demand for protective gloves. And secondly, below the EBIT line, we can still see a massive increase in earnings after taxes, and we can also see a massive increase in free cash flow, which supports our growth strategy going forward. I will explain more details about CapEx in a minute, but I want to say upfront that we will be focused on higher growth investments in future as we accentuate issues such as innovation and quality leadership. As to CapEx on the next slide, you can clearly see the upward trend since Q3 2020. Investments at Sempermed still accounted for the largest part of our CapEx budget, but we also increased our growth investments in various industrial segments. From today's perspective, we expect CapEx in the range of EUR 45 million to EUR 50 million [ per ] end year 2021, which is lower than expected but also a result of all the supply constraints we have talked about earlier. Over the page, you will see free cash flow continuing its exceptional growth part even after recognizing our investment of EUR 48 million in U.S. dollar time deposits. The latter appears as part of the EUR 80 million total of investment cash flow. In turn, operating cash flow more than doubled year-on-year given the strong operational results we described earlier and would have grown even more if we had not faced headwinds from raw materials and logistics. On Slide 20, we present the major part of working capital since Q2 2020 with clear signs that we managed to contain proactively inflationary price pressure and excessive inventory buildup [ seen elsewhere ]. The increase in inventories mainly related to the limited container availability in the medical sector as well as the increase in raw materials in the industrial sector, received our full attention, and we intend to reduce it in the future oriented and sustainable way. Trade receivables and payables have already been successfully managed from quarter-to-quarter. As a result, trade working capital as a percentage of trailing 12 months revenues further declined to 17% and compares favorably not only with the previous quarter but also with Q3 2020. As the CFO of the company, I'm proud about the figures shown on Slide 21, although they are the results of our team effort. You are familiar with the key building blocks. But what I would like to highlight is the EUR 286 million cash and cash equivalents, including U.S. dollar time deposits, in addition to unused credit facilities of EUR 90 million. Meanwhile, we have also repaid the maturing Corporate Schuldschein loan in November. By end of September 2021, we had 0 net cash position and a growing equity ratio of 51.7%. With this strong financial position in mind, let me come to our updated outlook for 2021 at Slide 23, which, as mentioned right at the beginning, is expected to come in slightly below the original target of EUR 395 million. Against the backdrop of severe headwinds from raw material, logistics and labor, we perceive being short of a single-digit amount as huge success and strong encouragement for 2022 regardless of the environment remaining difficult. With the price decline for protective gloves accelerating in Q4 2021, we reinforced our strategic focus on growth in the industrial sector and have identified new projects for innovation and quality leadership, as Kristian has mentioned before. At the same time, we continue with the previously announced growth strategy, where we have entered the implementation phase and are paying high attention to disciplined execution. With this, we have come to an end of our presentation. And Kristian and I are now available for any questions you might have. As in the past, please bear in mind that we cannot go into any details about current M&A activities. Thank you. And operator, please start with the Q&A session.

[Operator Instructions] The first question is from Wolfgang Matejka with Matejka & Partners Asset Management.

Thank you, Ms. Preining, and thank you, Mr. Brok for the presentation of those really outstanding numbers. And congratulations for the effort and, let's say, the luck to be right positioned when that pandemic started. My question is related towards the results now and maybe your expectations for 2022. So the first one is a result of free cash flow of EUR 208 million just tries for the question, what's to do with this despite a quite low amount of CapEx already in your perspective. So maybe you can lose some words about your perspective in relation towards dividend already in state of the view that the equity ratio that you already mentioned being higher than 51% maybe can be some kind of protective barrier against your higher growth that you already expected before, so your leverage factor is shrinking in that respect. And maybe a short word regarding your CapEx investment in the U.S. will fit my presence. And then after that, I'd like to hear about your personal view related towards the development in '22 for the latex universe in general, rubber universe in general, please.

Thank you very much. A lot of questions. I noted down 4. I will start by -- maybe in a different sequence. If I missed one, we will come back to that or you will just jump in. We will split that -- the answering of those questions between Kristian Brok and myself. If I may start with the use of funds, we have a percentage in the half year presentation. This year, the capital allocation and the use of funds in a rather -- in a detail, let's call it this way. We have also gone into our M&A strategic outlook. We spent some slides on this as well. So it appears -- can you still hear me? Very good. All right. No problem. I thought I lost you. Well, in regards to dividends, I think it's too early right now. It's -- as you very rightfully have said, it will be a very good year in 2021. The Q3 results we have just presented for dividends, I would say it's too early. The use of funds, we are clearly focused on organic and nonorganic growth. We have also, as said, highlighted the past and the target structure in the half year presentation. I hope that helps. To the outlook 2022, and then I hand over to Kristian for CapEx U.S. and latex universe. With the outlook 2022, I'm pretty sure you have also heard of the -- our competition and the prices they have assumed now for the upcoming year. The -- currently, we see -- we have reached the peak in April this year when it comes to average selling prices followed by a plateau starting to decline. And now in Q3, we have also already seen a stronger decline. And now being in the midst of November, we can see the prices to decline even further or faster. With Delta plus and influenza at least in Europe and the -- and in the U.S., and this is -- these are our main markets, it will -- it's still very volatile to have a very detailed script on the ASPs at the beginning of the year. But what is clear that the ASPs are coming down in a -- as predicted and as already announced earlier midterm to pre-COVID level. But how fast this will happen? We will see.

Okay. So for me, the rubber price development is always tricky to view because the only proxy that we have in capital markets in our normal view is the normal rubber price, the future on the normal rubber universe. And this is not coming down that future development of price. So it's very interesting to listen to you about your perspective in relation towards the whole business.

I think that specifically on rubber, we tend to concur on that view that the rubber prices, they are specific rates that may deflate a bit. But the general outlook is that we will see relatively higher prices going forward at least as far as we can see right now. On the U.S., on our investments there, this is definitely a breakthrough for us. It's the next stepping stone to -- for growth and especially in the seals business. And then we are basically there now that it's a bit shy of EUR 10 million investment that we have done so far. And it's -- we are up and running. So this is ramping up as we speak.

The next question is from Christian Obst with Baader Bank.

I have 3 questions so far. First, on Sempertrans. So we have low utilization rates and the volume problems, of course. But demand is picking up a little bit. And having in mind that you had a lot of cost measures implemented during the last 1, 2, 3 years, so -- and you currently have the highest management attention on that. So what is the -- what are you doing within Sempertrans currently? So what can you change going forward to improve the margin quality of Sempertrans? That's the first question. Second one is on Sempermed. Of course, due to these kind of logistic restrictions, there is an inventory buildup. Can you say something about the margin quality? And will we see that this a little bit elevated inventory there will come down during Q4? Or will it last into the next year? And the last one is a little bit to understand dynamics in the entire glove market. I can't -- it's quite interesting that we have some kind of limited production in Malaysia due to production restrictions and so on and so forth. But we have an accelerating price decline. Is it due to more capacity or a faster falling demand? Can you give some kind of -- or shed some light on that?

All right. Again, I think we will split it up. I take -- I'll start with med and inventory, but the inventory level for med basically due to the difficulties we see in the container shipment or in the availability in the duration the containers spend on sea and then the offloading. So there is clearly more time the container spends on a vessel than before. So the inventory buildup is due to the container availability, the shipment time and the offloading. This definitely has to be -- has to come down. We are working on this. We also see some improvements already now. The problem with the container availability, unfortunately, I can say we're not alone in that area of problems. So I think this will -- we will see that for a longer period, but we are working on it to bring it down. So this is related to input terms and the time the gloves actually spend on a vessel and in transport -- in transit. On -- maybe one word on trans and we split trans, I think, a bit. Trans, yes, had a lot of management attention or had already a lot of management attention before. What we see though now is -- I wouldn't say that -- it might sound too weak, the light at the end of the tunnel. And why is that? Because with all the raw material constraints, obviously, also the mines are now starting to pick up or to issue orders again in a higher quality, in a higher volume. So the constraints on the raw material has definitely a positive impact on the mining sector. As you know, trans is late-cyclic. Therefore, it's -- with all the tenders, it takes some time other than with flex and seal, for example, to see those developments in our books, but we see definitely positive signs on trans, the order book and the overall capacity also towards the heavy-duty steel belts. And I hand over to Kristian.

Yes. If I just may add to that. I mean this is definitely -- this is high tension area, has been, and it is late cyclic. So even though that is the case, we still have uphold at least a decent turnover, but there's no quick fix to this. This is basically having attention to all the nuts and bolts that are in the business, and that's what we do. So that is everything, all cost elements, all engineering parts. And that's supplemented with the necessary CapEx as not excessive CapEx, but the necessary ones to carve out costs and gain efficiency here and there. So -- but again, it is not -- there's not a magic wand that we could just hold over it. This is hard work, and it's in the details.

And then your last -- sorry. And then your last question was on the EMCO and the -- also the capacity we see in the gloves market. As you know and also everybody on this call also follows the announcement of our competition, not only the top 5 players but also the Chinese competition. There has been some ramp-up already in 2021 and more announced for 2022 to come. We also saw that might be delayed a bit due to also raw material constraints but also based on the current situation. So we are not yet 100% sure that the capacity which has been announced will actually also hit the market. But having said that, yes, there is more capacity on the market and there will be more capacity coming in 2022.

I think that, Petra, perhaps that covers it some.

Yes. Last one, again on the Sempermed. So the margin quality of the inventory you're currently shipping, is that the old margin quality? Let's put it that way. Or is margins still massively deteriorating? This capacity you still have on the books.

The -- I mean internally looking forward, the -- I'm not sure I -- because I lost you in between at the beginning, at the center. So I'm not sure I got your question right, so jump in if I start at the wrong angle. The margin definitely will decrease forward-looking as the ASP will come down. A question compared to pre-COVID will be to which extent the raw material and energy costs as well as labor will kick in and for a short period, put more pressure on the margin than we hoped for. Let's put it this way.

Yes, of course. So my question was more related to the current inventory, which is on the sea or aboard -- whatsoever and what the quality there is but it's okay.

The next question is from Markus Remis with RBI.

A couple of questions, please. I have them one by one. Firstly, a clarification on the topic of price erosion. When you say it accelerated in Q4, does that refer to the market prices or to the actual prices that you will realize in the fourth quarter? So I guess the question is more about the timing. So an acceleration of market prices would probably mean stronger price pressure than in Q1 2022 for you. Or is that actually the realized prices you will digest in the fourth quarter?

Okay. Thank you very much. You know that we will not disclose our prices. We never had. But you also know that we are not the biggest player on the market. So we obviously have to follow the trend of the market. So we do not set the price...

But I did not ask for -- yes, but -- sorry to interrupt you, but I did not ask for any pricing in absolute terms. Just whether that wording about acceleration in Q4 it refers to the market prices, which then means your realized prices in Q1 or to the actual sizes you've made in the fourth quarter.

The acceleration is in respect to a reference to our Q3 average price. We -- I can give you rough percentages. So compared to January, the price has declined until end of September by 20%; and compared to end of October, by 25%. So January to October, 25%; January to September, 20%. Does this help?

Yes, yes, kind of. Then on the volume effect. I mean when I look at Q3 against Q2, you lost about EUR 75 million in revenues. I would assume it was a bit of a volume effect given the lack of shipping capacity in this EMCO issue. But how should we kind of -- I mean that's about 40% or so. So when you now say it's accelerated into the fourth quarter, I mean that means we are probably back to revenue levels of Q1 or Q2 2020. Is that a fair assessment?

Yes and no. It's a mix actually because it's also the effect of having a slowdown during -- due to COVID at a certain time. So it's a mix of price and volume. And the volume is not demand-driven. That is simply how much we and a lot of our competitors were able to actually get out, get through because the -- because of the COVID restrictions, which fortunately are lifted in that part of the world. That's for the time being.

Okay. Is there -- I mean now that we're seeing a revival of corona cases around the globe, is there a learning from the last kind of spike despite last autumn in terms of pricing? Or meanwhile, simply more capacities on the market so that this -- the rising cases will not have a meaningful impact?

Well, I think the situation is completely different compared to when corona started. There was a lot of panic-buying, first of all. There was an overshoot like there always is in a situation like that. So the situation now is that there is a higher global storage or you say warehouse gloves in total, and that needs to be replenished, of course. But just building that out, that created the surge that we saw in last year basically. So we can learn from that, but that's not in -- demand-wise, unfortunately.

Right. And in the last presentations, you always gave kind of an indication until when you're sold out in med. I haven't spotted this in the Q3 presentation.

That is also -- that is basically why we stated we have an order book which is solid, a good play -- a good way into 2022, but saying that we are sold out, I think that is, as you pointed to, the uncertainties.

Okay. But are you also seeing cancellations? Is that something which is occurring now?

No, I think we have a good quality of our order book in general, I would say.

Well, we do see -- okay. Well, we do see some postponements here and there. But overall, as Kristian has said, the order book is very solid. And we, as initially said, have actually sold the volume until the end of 2022.

The next question is from [ Sven Bafchard ] with [ Risemoshe ].

Congratulations to the strong results. A couple of questions from my end. I mean I recall when Sempermed was a problem child and part of the noncore business and then the [indiscernible] hit with the corona pandemic. And as I see it, it was a bit of luck to repair the balance sheet. You are now in a very strong position. But how big would you judge the risk that you now wait too long before exiting the business? Because I believe around the world, there is very strong capacity build in this space. You have wrote up goodwill again or had to write up goodwill again. How big is the risk that this is an overcapacity market where you lose business again and are not competitive down the road and you have to impair again and are unable to sell? This is the first question. Second question is, is the very strong balance sheet you have with this cash flow generation, how big is the acquisition power? What is the comfortable net debt-to-EBITDA you would go or for how much you want to buy? And then if I look at the core markets, I mean what struck me a bit, you have seen a strong recovery in Semperflex, for example, compared to 2020. But if you look at the segments compared to 2019 and compare it to other companies in the industrial supply business, I was wondering a bit -- I mean many of these companies have already surpassed 2019 levels. And if you have a strong position within your industries, you are also able to push through price increases at least with a lag. And I understand in Sempertrans, you mentioned it -- to some degree, it's a late cycle and it tends to take longer, but Semperflex is more early cycle and I thought you have a strong footing there. I thought you could better pass through price increases and potentially also see a strong recovery also [indiscernible] to 2019 levels and stronger margin given all the restructuring efforts you have put in into the company also before corona.

Thank you. So if we take the -- your first question first on what you referred to as our former problem child. I think that is a bit -- that's one way of seeing it. We definitely don't see it as -- we see a very successful turnaround of -- especially the biggest plant in med that has actually enabled us to take the benefit of in the market. It's a management effort of, I would say, massive dimensions made by the team that operates the facility. So coming from definitely not a competitive situation, definitely not competitive performance, but simply just making it -- the factory run, I mean, almost at record levels or at record OEE or efficiency rates. And that has been achieved throughout the year, the last year. And that also responds a bit to the other part of your question, our future competitiveness, but that is determined by OEE. It is simply how efficient we operate the business, and it operates in a very efficient manner. Are there others out there? For sure, but this is definitely a competitive advantage of a massive scale for that part of the business. So this is -- I hope that, that answers your question on the former problem child, and we see it as a management effort of significant dimensions.

Okay. Then let me take the second part of your first question on the impairment. We -- as of 30th of September 2021, we do not see any triggers. We are monitoring the market development. It's at the law. It has to be impairment tested by the end of the year. We will do so -- and -- but as for now, for the 30th of November -- sorry, September, we do not see any triggers on the impairment. I will then also take the second one on net debt-to-EBITDA, M&A firepower, let's call it. It's -- we will not disclose any details here, as I said earlier. But as you are pretty well aware, there is certain ceilings the bank would not very much like to exceed, which is 3.5x. So I would see that also, in our case, to be given. But -- so maybe that helps you to identify our firepower on the M&A transaction on the potential one. And lastly, I wrote down the last of your questions were on price increases for trans, flex and other segments. I think it's fair to say the closer we are at a commodity market, the more difficult it gets. But we have had successfully now implemented price increases throughout the entire portfolio. Trans, as you have very rightfully said, it's also -- it's a different animal because it's project business. So on trans, it's -- you assume that you sign a tender a year ago, obviously, you are -- the terms and conditions are fixed by signing. So it's very different from segment to segment. But we have successfully -- and it also shows our EBITDA. We have just shown you, a couple of minutes ago, that we have successfully fought back and passed on the additional raw material, energy, labor costs. Kristian?

Yes, yes. And of course, logistic cost is definitely also passed on. So Lloyd, this is of importance. There's different time lag on the different products in different segments.

Okay. But 2 follow-up questions on this. On the first one on Sempermed. I see that this is strong management efforts. Sorry for that, if that came not through, but the question was more is it then if volumes normalize post-corona to pre-corona level or a bit higher, you believe the efforts you have done will also allow you to run this business at a reasonable margin? This is the question.

We have a completely different company or part of the company segment compared to what was the case 2 years ago. And I think that what has been achieved, the OEE, as I mentioned, that sets the competitiveness for the future as well. We will be able to compete.

Okay, okay. But on the margin side, on Semperflex, is it also right to assume then if prices stabilize or even slightly come back going forward, with the time lag, we should expect you to have this margin increase because it can give increased prices with the time lag? Or if they don't go down, you can keep them at least for some time?

We certainly do not give any price increases away and -- but the volatility is on the cost side these days. It's -- we are definitely sitting on the price and the price increases very, very thoroughly.

[Operator Instructions] The next question is from Roland Könen with Value Holdings.

I have already 3. First one, sorry to bother you with this topic, the order book in Sempermed, I have in my notes from the last 2 calls that already bookings for 2022 are almost completed in Q1, and Q2 is nearly full. So today, you are talking about -- we are well into 2022 booked. It sounds for me a bit different than the quarters before. So can you clarify maybe here at this topic? The second one would be on the, yes, EMCO effect in the plant in Malaysia in the summer. Can you give us a rough number or indications? What was the effect on volumes and sales? And what was the effect on volumes and sales because of the limited container availability? And the last question would be on working capital. What is there your expectation regarding working capital management to the year-end? Yes, that would be my question.

Okay. Let me just, right, jump to the first question, the order book. And maybe you haven't heard it or maybe I haven't said it loud enough. The order book, we have just confirmed for med. It's fully booked until the end of 2022. I've answered that question in comparison whether there has been cancellations, which we said, no, there has been postponements but -- shifts on a few occasions, but the order book is as you have noted it down from the previous calls. On the EMCO effect, Kristian?

Yes. Of course, there was some setback, as I mentioned already, when we were discussing the volumes. It's probably to the tune of 10% of the volumes whilst we had the COVID difficulties and maybe a bit less than 1 month and a bit more on the other month, but that's the magnitude. And the last one? And the last one.

And the last one -- it's me again, working capital year-end. The -- actually, we're still doing quite well when you compare to what has been announced by other companies, peers, the industrial market so far. So we are tackling the working capital -- trade working capital very, very closely. What I -- what we try and we're eager to reduce, but where we're a little bit on the passenger seat, is when it comes to logistics and the constraints of the very same. So yes, we are working on reducing the inventory level. To what extent? We will be successful in 6 weeks from now. We see already some improvements, but I cannot give you any detailed numbers. The raw material prices go up, as you do know. So therefore, the inventory from the industrial segment, as we have also put in our presentation, is under pressure. But on the Sempermed side, we have already said it's basically due to container availability. And on this end, we are bit on the passenger seat, as you might recon.

Okay. Many thanks and congrats to the results and all the best for the last weeks.

Thank you very much.

Thank you.

There are no further questions at this time. I hand back to Ms. Petra Preining for closing comments.

Thank you very much for your attention and all your questions and looking forward to hear you for the annual results in March. Thank you very much. Bye-bye.