Semperit Aktiengesellschaft Holding (SEM) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Semperit AG Holding Conference Call on the Publication of 2021 Annual Financial Statements of the Semperit Group. [Operator Instructions] I would now like to turn the conference over to Petra Preining. Please go ahead.

Ladies and gentlemen, good afternoon, and welcome to our 2021 full year results conference. Before we start, please allow me to briefly introduce you to our exceptional setup with all 3 Board members present. Kristian Brok, our COO, has been on Board since the beginning of 2020 and was thus the only Executive Board member present throughout the whole last turbulent year of 2021. Karl Haider assumed his position as CEO at Semperit this year January. And finally, as you might be aware, although I have been involved in key issues of the Semperit Group as a member of the Supervisory Board for a long period, I was permanently appointed CFO in 2021. So in order to give you a comprehensive picture, we have therefore decided to, exceptionally, all participate in this conference call. I'm now pleased to introduce Karl Haider, who will start with the presentation of the full year 2021. Karl, the floor is yours.

Thank you, Petra, and good afternoon from my side as well, ladies and gentlemen. It is a true pleasure presenting to you for the first time in my new role as CEO of Semperit Group. First and foremost, I could not have imagined a more exciting as well as difficult start than in the given field of tension. On the one hand, outstanding corporate results of the Semperit Group, a company that has really done his homework in the recent years, successfully restructured its business and achieved a great deal of professional behavior in day and day crisis management. On the other hand, the dramatic environment of war, not far from our borders of Semperit's country of origin with an associated human tragedy and negative effects on European industrial companies and as well the entire rubber industry. I have been to this part of the world many times in Ukraine, in Vyshneve, in Odessa, in Kyiv. But I have also worked in countries like Romania and Bulgaria, which is neighbor countries are particularly close to the current Ukraine. On the sales side, Semperit Group might have only a limited exposure to Russia, Belarus and Ukraine. In total, 2.6 percentage of revenues in '21. But we are very concerned about the daily destruction as this will most likely impact economic activities for many years to come. My own professional background is a technical chemistry and I have worked in various managerial positions for leading companies like voestalpine or Vorstandsmitglied. There, I was responsible for operations, supply chain and commercial functions of the sales and marketing and project management, but also for large-scale M&A activities. This is a good prerequisite for taking Semperit to the next step forward. So let me start with Slide 3 and the highlights of the 2021 financial year, which could not have been a better foundation for me to start as the new CEO. Despite all the well-published inflationary impacts and scarcity from raw materials, energy and logistics, Semperit Group managed to achieve another record result in 2021. And I just want to congratulate and thank all employees for this outstanding performance. For our core Industrial Sector, I'm particularly pleased to report strong sales as well as a strong order book and improved operating performance. And this against the backdrop of growing headwinds in the second half of '21. In this context, I would like to say thank you, a special thank you to Petra and Kristian and their teams for a proactive working capital management, which helped to navigate around the logistical impasse. At the same time, having very much benefited from the huge demand for medical jobs during the corona pandemic. We should also clearly outlined that the price plateau has been reached in quarter 2, 2021. And we face since then a progressive decline. This has implications for our growth and earnings potential, which we will show in more detail throughout the presentation. Finally, and here, I look again to Kristian and Petra, the strong cash flow generation greatly supports our strategic aspiration for organic and inorganic growth. This makes my job much easier for implementing our vision for becoming a global polymer engineered company with a midterm sales target exceeding EUR 1 billion. I will now continue with the sectors overview on the next pages and Kristian will afterwards provide you with a comprehensive presentation of the operational challenges we are facing. On Slide 5, you can see a brief overview of top line and margin development of our core industrial sector over the last 2 years. From my point of view, there are 2 important developments that are crucial to our future position. First, revenues recovered in '21 to pre-pandemic level, and this by a very impressive 16 percentage year-on-year growth. And second, in absolute terms, we managed to turn around the EBITDA gap and exceeded 2020 and get closer to the level of 2019, too. It means you could also almost close the margin gap compared with 2019, but are now up against a more severe price inflation of raw materials, energy and logistics. So far, we have managed to offset inflationary pressure through proactive price adjustments, and we will provide you with more details on date later. Moving to the operating update by segment and starting with Semperflex on Slide 6. I'm very pleased to report both the order book and revenues exceeding the pre-corona level despite some regional differences. Semperflex is an excellent example with a much higher operating performance we have achieved during the previous transformation combined with proactive price adjustments in '21. This made the segment fit for purpose against the limited availability of raw materials, but also cost inflation for raw materials, energy and logistics. Given the severe supply chain disruption, we had to trade-off between further cost optimization and the reliable fulfillment of customer awareness, which explains the somewhat lower margin in 2021. On a very positive note, we ramped up capacity at our Odry site in Czech Republic during the second half of '21. Turning to page and continuing with Sempertrans. Higher demand for raw materials has stimulated mining industry activity and advertise for investments as well as maintenance requirements, just as we have anticipated earlier this year. As a result, at the end of full year '21, our order book has more than doubled compared to 2020 as replacement orders increased massively and also indicates to pick up in 2022 with additional business. If excluding the positive one-off effect from a so-called recycling of historic foreign exchange differences from the previous liquidation of the plant in China at quarter 3, '21, however, there was a significant year-on-year EBITDA decline. This is a result of price pressure from raw materials and logistics as well as lower volumes. Also, if you compare the segment with the others in the Industrial Sector, looking ahead, there is limited scope for price adjustment in the project business. As had been mentioned before, Sempertrans continues to receive high management attention from the Board. On the next slide, I'm delighted to report a strong order book for Semperseal, being well above the 2020 level and translating into a very impressive 28.7 percentage revenue growth year-on-year, notable due to a strong recovery of the construction industry. Equally, EBITDA was up year-on-year and above the pre-corona level, but impacted by cyclicality and seasonality in the fourth quarter. We've previously initiated price adjustment holding different dynamics. Continuing sharp cost inflation of raw materials impacted EBITDA, EBIT and margins. But despite ongoing headwinds, we achieved excellent performance in delivery and reliability, which is highly appreciated by our customers. And I should also mention that our new U.S. site -- production site in Newnan, Georgia, we ramped up the first production line in early March '22, and the second line will follow in the third quarter of this year. Finally, for the industrial sector, on Semperform at Slide 9. We can equally report a strong order intake, leading to an 11% revenue growth supported by regional portfolio expansion. We are particularly pleased about the top line growth at handrail and Semperit Engineered Solutions, exceeding the 2020 level, which applies specifically for railway, piping and household industries. In terms of margins, the change of product mix with a lower share of high-margin businesses, such as ski foil business due to the corona-related lockdowns and higher cost results in a decline compared with 2020. Over the period, Sempermed still managed a very impressive 39.4 percentage revenue growth for the year as a whole. While EBITDA doubled over the period, largely to the phenomenal performance on the back of very high average selling price for medical gloves. This was achieved despite a lower production volume due to COVID-related lockdowns, following government regulations in Malaysia over the summer and a reduced availability of protective gloves. We also faced an inventory buildup to the limited container availability, which impacted our operational cash flow. What is visible in the chart on the top, we see a change in market dynamics. On the one hand, a decrease in demand is recorded due to the seemingly more relaxed corona situation. On the other hand, also new capacities are coming into the market. Consequently, these factors are affecting the demand and dampening price developments. The steep drop in price after quarter 2, 2021 clearly resulted in a significant margin decline, which was further aggravated the headwinds in raw materials and logistics. At the same time, we made our own contribution as we ramp up plant P7+, which would increase gross capacity by 18% in the future. From today's perspective, the order book is strong and above pre-corona level. This led me as the new CEO conclude that Sempermed is in a great shape and has made massive operational improvements. With this, I would like to hand over to my colleague, Kristian to take us briefly through some of our recent efforts to take to price inflation, raw material availability and supply chain constraint. Kristian, please?

Thank you, Karl. Good afternoon from my side as well. Given the unprecedented developments in the recent weeks, let me start with a short update on the key headwinds and challenges and how we have counterattack these and how we intend to further counterattack what we are seeing on Slide 11. Most of these issues were already discussed at our Q3 call 2021. But there's no doubt that things has been taken completely new dynamic -- a completely new dynamic direction over the past weeks particularly after the Russian invasion into the Ukraine. As previously discussed, we faced rapidly rising cost, notably for raw materials and consumables as well as transport that go along with an aggravated availability and difficulties in calculating availability. But there's a new dimension for energy cost and labor too, particularly energy prices keep rising steeper and faster than we're able to pass on to the customers for the time being. More importantly, for us as a management team is what we can do about these challenges through our internal capacities and mobilizing capabilities. The first thing I would like to highlight is the best testimony for Semperit being in a new shape that is that the strongly aligned and flexible collaboration between different segments and functions in our organization in terms of supply chain management, procurement, R&D and production. This has ultimately led the foundation for stronger operational resilience, making the company more responsive, more flexible and further improve our operational efficiency. In terms of energy, we have managed to reduce our overall energy consumption through more efficiencies and -- efficiency increases and at the same time, initiated an element of selective precontracting energy. As to the supply chain constraints, we have further advanced our strategy of global multiple sourcing of raw materials. Since the very first day of the COVID pandemic started, we initiated this. One other key element of the new Semperit is our improved service level. There's no doubt that we are much better in terms of on-time delivery and quality of services these days. Finally, we continue with our consequential sales price increases, mirroring the cost increases that we see, actively engaging with clients and customers in a timely and proactive manner. Over the page to Slide 12. We present 3 charts to illustrate the unprecedented price increases of raw materials and energy that we saw in 2021, increases that are still in place continuing as we speak. Butadiene, the main raw material for synthetic rubber and latex increased across the group, but to different extents. So in Asia increases were up by -- prices were up by 43% and in Europe 153%, and that is in 2021 compared to the previous year. Thereafter, we saw a decline in the second half of 2021 and now again, a sharp upturn. Prices for the filler carbon black closely relates to heavy fuel oil, and that in turn correlates strongly to crude oil. In 2021, the average price level of heavy fuel oil was by 1/3 higher compared to the 2020 average price. And due to supply bottlenecks and higher energy and logistics cost prices for carbon black have now gone up significantly further. Equally, on wire rod or steel, but wire rod, especially, the price has risen as well, which is a raw material that is highly relevant for Semperflex, but also for Sempertrans and Semperform. And that continued the sharp increase in 2021. And that again increased -- exceeded the level of 2020. After a price correction in the second half of 2021, it has now gone up again. So that is the overall trend on those important raw materials. Gas prices increase and volatility effect only or primarily the European production sites. And furthermore, around 60% of our price risks for natural gas at the European sites are hedged in the short term, depending -- in the short term, depending on the actual demand. These charts indicate, and as just mentioned before, we clearly have a strong focus on the topic of raw materials and our sourcing. We are continuing to further improve our operational efficiency in order to offset these cost increases. And beside focusing on the cost, we also step up our efforts to enhance the globalized multiple sourcing. With this, I've come to an end of my presentation and hand over to Petra for the financials.

Thanks, Kristian, and hello, back, everyone. First of all, allow me also to express great consternation and deep concern about the war in the Ukraine. Having worked in various international companies over the past 20 years, I've always firmly believe that peace and security are the backbone of economic prosperity. In many ways, the war in the Ukraine has deteriorated the previous situation of sharp cost inflation for raw materials, energy and logistics and has caused additional supply chain disruptions. Therefore, by publishing historical results for 2021 today, we almost see a tale of 2 stories: reporting record results for the full year 2021 for getting more cautious about the 2022 outlook. And thirdly, this is again largely driven by exogenous factors. So let me first summarize the highlights of the 2021 financial year on Slide 14 and say a few words about what we, as the Executive Board, the senior management and the entire team were able to manage. As we have indicated in our third quarter results call in late November, growing price inflation for raw materials and transport throughout the first 9 months of 2021, was aggravated by additional cost pressure for energy and labor in the fourth quarter. This is important to understand. It's important to understand where we stand right now and what measures we took in late 2021. As the CFO of the company, active working capital management remains one of the key tools to take supply chain constraints. This, in addition with higher CapEx spending helped to continue operating smoothly throughout the last few months and supported our growth plans. The third key management tool was and will remain our focus on cost measures and operational efficiency to try to offset the above-mentioned external market sector. These internal efforts helped not only to get record results over the finishing line, but also to maintain a robust balance sheet and continue with strong cash flow generation. As Karl took the helm of the new CEO in January this year, we are now financially in great shape to support our future organic and inorganic growth aspirations. Although we continue to focus on the implementation of our strategic targets, we obviously cannot ignore the dramatic situation arising from the Russian-Ukraine conflict. Hence, we have thoroughly analysis -- analyzed the situation even before the first forecast and warnings from major industry body. We have concluded that our 2022 EBITDA is likely to be significantly below the average market consensus as of early March of EUR 100 million to EUR 120 million. Over the page, we present top line growth by segment with Sempermed still being the driving force, up by 39.4% year-on-year, but the industrial sector also showing double-digit growth for all but Sempertrans. Aggregated growth of 27% and group revenues exceeding EUR 1 billion was clearly an unprecedented achievement in Semperit's history. The industrial sector contributed additional growth of EUR 77.6 million or 16.2% compared with 2020. I am particularly pleased about the strong performance of Semperflex and Semperseal, which has received a proportionately higher share of CapEx in 2021 and is clearly paid off. I will come back to the CapEx numbers in a few minutes. If we apply the same chart analysis for reported EBITDA on Slide 16, we clearly see that EUR 176.9 million top line growth at Sempermed, translated in a very strong EUR 150.8 million EBITDA. The latter in fact doubled compared with 2020, which is a clear testimony for all our efforts and investments to improve operational efficiency and increase profitability. In turn, the conversion rate for the industrial sector was more modest, but still resilient given economic circumstances. In historical perspective, Semperflex continues plugging ahead with another strong 21.3% EBITDA margin, but we are also pleased about Semperform exceeding double-digit margins and Semperseal getting close to that. The EUR 3.1 million decrease in reported EBITDA and the corporate is largely due to advisory services for our strategic development, our IT transformation program and the low value assets, especially from IT equipment in content of moving the corporate headquarters. Turning to page, Slide 17. So it's probably the most important chart to understand the moving part of our operating performance in 2021. Our proactive price increases throughout the year produced a positive price effect of EUR 315.9 million, thereof EUR 292.2 million in Sempermed, which in turn offset negative volume effects and additional cost of materials and purchased services by large margin. Please note that energy prices were seemingly not a major issue. This is explainable with 2 opposite effects. A major share of our energy costs translate to our plant in Malaysia, where we had lower production volumes due to supply chain issues and EMCO, Enhanced Movement Control Order in summer 2021, and this lower energy consumption and costs this year. Furthermore, low gas prices were provided by the Malaysian energy regime. On the opposite, we clearly have seen rising costs in the Industrial Sector, but the majority of these increases has been outbalanced by the former effect. And in addition, at the same time, our additional efforts to improve energy efficiency clearly paid off too. The cost of materials rose due to higher production volumes on the one hand, but also to price increases for input factors. Other operating expenses were mainly affected by higher freight costs and higher consultancy and IT costs. All these moving parts show the impact from external factors, but also where we as the management could make a difference, notably in our pricing policy and working capital management. The next slide is a nice summary of key financial performance indicators of the last 3 years, and it clearly shows the consistent year-after-year improvement. There is no doubt that the corona pandemic has helped with a massive surge in demand for medical gloves. But the chart on Slide 18 also shows the strong margin improvement and from a CEO perspective -- CFO perspective, an extraordinary free cash flow generation. Again, I will discuss this in a few minutes as it's crucial for our strategy implementation. In terms of CapEx on Slide 19, 2021 marked a notable step-up compared with a very low level the year before, which is largely explained by the impact of the corona pandemic. In turn, the additional CapEx in Sempermed in 2021 were earmarked for capacity increase. 6 new production lines to meet continuing high demand and complete our investments for productivity gains. As mentioned before, within the industrial sector, we prioritize Semperflex and Semperseal, which implies investments for future growth in new technology, also including our new plant in the USA. Going forward, we are planning to keep the CapEx level at least at the 2021 level and further invest in growth in the Industrial Sector. Over the page on Slide 20, is a familiar chart on the steep upward trend of our free cash flow generation, which we might not want to take for granted going forward. Anyone looking back over 3 years period, we managed to triple operating cash flow by year-end 2021, which largely translate into free cash flow despite increased cash flow -- outflows for working capital buildup and increased CapEx in 2021. As mentioned at the beginning, active working capital management remains an important tool for our finance team to deal with the challenges of supply chain constraints and often supply the availability of raw materials and components. There is a notable inventory buildup, both year-on-year and quarter-on-quarter. On the one hand, due to volume as we need a buffer to keep production running smoothly and on the other hand, due to increases on the price side. But you can also see our effort in terms of getting trade receivables consistently down quarter after quarter, while at the same time, proactively managing trade payables. This, in total, resulted in a trade working capital as a percentage of sales ratio of 16.1%, which is low by our own historical standards and certainly very competitive amongst other industrial companies of our size. Still, at this point, I have to say that forward-looking, the challenge of managing the working capital will once more increase further as the geopolitical situation will clearly have an impact in the coming quarters. The next slide on our balance sheet and financial profile makes me as the CFO, particularly proud of. This is something we have worked for very hard over the last few years, and it provides us with optionality for future organic and inorganic growth. As of 31st December 2021, we had cash and cash equivalents of EUR 236 million and in addition, unused credit facilities and short-term loans of combined EUR 176 million. As in previous quarters, Semperit Group remains net cash positive with a net debt EBITDA multiple below 0. In turn, our equity ratio is now at 56.3%, much stronger than at the end of 2020, which supports our claim for a very strong and robust balance sheet. We will propose a dividend of EUR 1.50 per share to the Annual General Meeting. Let me finish with our capital allocation priorities on Slide 23. As this is not only close to my heart as the CFO of the company, but also the defining platform for our strategic focus. You will remember the key building blocks from our presentation at the half year results in August 2021. Karl has now taken over the helm to implement our vision of becoming a global polymer engineering company with a clear focus on application and the midterm sales target exceeding EUR 1 billion, very much as we said before. The 5 key rationales for our M&A focus are familiar to you, and it clearly underpins continuity in strategy implementation by the new senior management team. We remain committed to pursue targets with a winning formula driven by secular trends, especially in proximity to our own value chain and the clear technology proposition. In addition, we prioritized by market attractiveness and competitive position with the ultimate aim of achieving a balanced portfolio, both in regional and product terms. As you heard from my earlier remarks, we are also increasingly focusing on future organic growth and have started investing more significantly in some segments of our industrial sector. At the same time, we, as a management, clearly bear our shareholder in mind. The total shareholder return is a key element of our strategic priorities, and we remain very much committed to our defined dividend policy, even though it is subject to exceptional growth opportunities. This year, we are going to pay a dividend, which is placing us in terms of dividend yield among the top 10% of the ATX PRIME, if you can check the picture right now. With this, I have come to an end of my presentation, and I hand back to Karl for a summary of our management agenda and the assumptions for 2022.

Thank you, Petra. Before I start to explain our focus on strategic parties, I would like to say a few words about our Medical Sector. In 2020, Semperit declared its intention to separate from this segment. This was then delayed due to the exceptional boom caused by the pandemic. I want to clarify our position here, very clear. We have not changed our mind. We have not changed our mind. We now see our traffic light control system, changing colors and have indeed started to reflect on the situation, while we have put the medical glove business on a very solid foundation. We remain convinced that the new owner would be a better solution for our medical sector. Coming to Slide 25, and let me finish with a few personal observation after more than 2 months in my new function as Semperit CEO and having progressed in setting the management agenda for 2022 and making first assumptions in terms of our financial performance by end of year. The top announcement we made on 9th of March, and this came 2 weeks after the war in Ukraine started on 24th of February and was essential -- was essentially a first recognition that existing bottlenecks in raw materials and logistics as well as massive price inflation for raw materials, components, energy and transport would deteriorate after heavy sanction had been applied against Russia. We also assume that current geopolitical risk might lead to more disruption in various European production facilities as well as to more supply chain constraint and delays. This led us to conclude that 2022 EBITDA will be substantially below the market consensus as of early March in the range of EUR 100 million to EUR 120 million. Having already met several colleagues in different locations and positions so far as the corona production measures allow, I can now say that I am highly encouraged by the positive energy, team spirit and talent we have in the company. This will be crucial as we will increase and we need to rely on our internal capabilities against the backdrop of iterating external factors, feed raw materials, energy, logistics or even labor. That will be absolutely clear. We will continue with our focus on strategic growth in the industrial sector, and we will strict manage the costs to maintain our newly gained competitive position. At the same time, we need to navigate around new economic hurdles and respond in a timely manner, whether making price adjustments, increased safety stock or simply sticking to our customer promise of reliability and quality of service. These are extremely unusual times with limited visibility on customers' propensity to invest. But I take great conviction from all the discussions I had with employees, customers and other stakeholders that we will all walk the extra mile to further strengthen our business and build the platform for future growth. With this, we have come to the end of the presentation and Petra, Kristian and myself are now available for any questions you might have. Thank you so far for listening.

[Operator Instructions] The first question is from the line of Markus Remis from RBI.

I'd like to take them one by one. Firstly, related to the disposal talks around Sempermed. If you can provide maybe some granularity on where you stand. I mean there have been rumors in the media, I think, about 1 month ago about the resumption? Are you talking to kind of the former perspective buyers? Is it how advanced are you -- anything you can help us understand about the potential time line, et cetera, that would be very helpful.

Thank you very much and very obvious and a very good question. The Executive Board of Semperit is consistently pursuing the transformation of the group as you know. This also includes the strategic landmark decisions made in January 2020 to focus on the industrial sector in the future. And this is still valid, as you have also heard from Mr. Karl Haider. In order to find the optimal time for this. The executive store is clearly monitoring the M&A market as well as the market and price development in the glass business. So the decision be made to sell the medical business, we will inform you in accordance with the legal requirements of capital markets communication. We will also inform you about the future progress of the transformation program in due course, but we will not comment on rumors you might have read in the news.

All right. Maybe turning to your capital allocation policy and the M&A angle. Where do we stand here? I mean, can you maybe give us some color on financial criteria you're looking for? What would be the maximum leverage you're willing to put on the company?

Mr. Remis, have you finished your question?

Yes.

I am so sorry for jumping in already. As you do know and does everybody who is in M&A actually knows current multiples are really very high. There is a very active M&A market. We have been informing you that we are in the process or we are in the screening process for some time. However, asking on particular details on the current status. Unfortunately, as you know, similar applies to what I've just said on your previous question, we can only inform you once we proceed. Asking about leverage levels, there are a lot of bankers on the call. You also do know that 3.5x, usually, this is the ceiling. And as you can also see from the consensus for 2022 as well as our recent talk, I think it's quite obvious what the temporary debt capacity will look like given also the cash and cash equivalents we have on hand.

Would you say that you got closer in the M&A process compared to say 6 months ago?

We definitely got wiser. We are also proceeding, but similar applies to what I said before, we will inform you once we cross that line.

Right. Okay. Then maybe coming back to may it in recent calls, you've always outlined how far your order book reaches at the specific point in time. Can you provide that information? Are you sold out for 2022 already? And then another obvious question, I guess. I mean, the price erosion, maybe you can shed some light on how that develops from the end of '21 compared to the end of March now?

Okay. I take the latter question first. ASPs are as you also know from us our competition are declining. This is nothing new. In the course of 2022, we will reach margin levels pre-corona. I think this is so much you can say. ASPs are deviating from product to productivity and also from continent to continent. So we cannot disclose any details on ASPs as we haven't done in the past either. The first question...

The order book.

Thank you very much. The order book, we have shared with you in the past, we can -- what we can say here is that the order book is way above COVID levels. We are to a large extent filled, but we also see as you can note on the positive term, we cannot -- we also see a lot of orders in -- for 2023 already now.

Okay. I mean how is the aspect of input cost inflation kind of countering the price pressure? So wouldn't it be fair to assume, okay, there will be kind of an upside to the pre-COVID levels? Or is that then compensated by the incremental capacities coming on stream and your peers putting enough -- or lacking, say, pricing discipline?

What can be said. And also here, I referred to what we have said in the past that our peers have increased capacity. We currently see that not to the extent of the levels, which have announced before. The questions on the margin, I'm not sure I understood you correctly. So if I got you wrong, and please jump in. The margins, the drivers for the margins are on the one hand, of course, that we have reached at least in our mindset, a post-corona level. Although numbers might look different, at least in Austria. The -- so in our mindset, we have reached a post-corona level from the aspiration of the buyers. The competition has increased capacity. The prices are still above COVID levels. However, we see that the input factors and you have heard it in the presentation from Kristian Brok, that also gas prices in Asia have increased. Our OEE, however, and also our capacity, as you do know, has increased as well quite significantly. So the Sempermed you see now is no longer the same company we have seen 2 years ago pre-COVID. Did that answer your question?

Yes, kind of. Final question before I get back into the line on Sempertrans, please. It looks to me as if you now have quite a comfortable order book. But I mean, that has a good sales dynamics, but do you see the threat of a major margin compression as you basically have locked in prices before the cost inflation really took off? And is -- and then final question is Trans a core asset or wouldn't it be a good time to look for a better owner?

We have locked in volumes. I think this is important to know. Therefore, we have also been able to take the tailwind of the ASP development. So the order book as such is in volumes.

In Trans?

No, you asked for Med, right?

No, no, my question referred to Trans sorry.

Okay. Excuse me. I was...

No. because you have quite a long lead time given the project business. So you've locked in the order book, which is kind of good from a sales dynamics, I guess. But I mean, I see the threat of cost inflation kind of not being fully reflected in the current order book for -- which will be worked off in 2022.

Okay. I will take this one then. So this is basically -- even though we have orders going out in time, we have raw material clauses and there was inflation clauses in these contracts. So even they are far out in the future, they're regulated. If that's your question.

All right. Okay. So yes, yes, yes. Okay. So no margin squeeze on that. Okay. And is it a core asset still for you?

Trans, yes, we are running. We have assets. We -- as Karl Haider also highlighted it, it's -- it is -- it has a lot of attention from our side because it is, as you pointed out, the project business, but it is a core asset for us. And of course, we are pursuing the -- consistently pursuing the transformation, and this is a part of the industrial sector. And therefore, Sempertrans has a lot of attention as well. Value-enhancing options. I mean that's the -- for a good future prospects that is important, and that is our obligation. And of course, we are working on that as well.

The next question is from the line of Christian Obst from Baader Bank.

Yes. Coming back to Sempertrans, first of all. So in the fourth quarter, Sempertrans went into the negative territory when it comes to EBIT. Is that what we can expect also for the coming quarters and then maybe picking up again because of the better pricing of the projects? That would be the first question then I have follow with the other questions.

What we have seen in the mining industry starting mid-2021, you can say that the positive side of the raw materials scarcity and the pricing that more and more mines went on stream and more and more mining companies are replenishing their belts. So the Sempertrans order book, as we have also stressed during the presentation, is almost double the amount we had a year ago. So we see a clear upward trend. This is a very, very positive sign. Also the urge of the mining industry to receive those belts and to receive them soon as long as the raw material prices are so high, helps definitely Sempertrans to regain its old strengths forward-looking.

Okay. And can we expect, based on this order book, this coming -- yes, getting a little bit more traction in the second half of the year?

Clearly, as you do know, Sempertrans has a longer lead time between taking in orders and having a top line effect. So this is what we see. We would not see any counter trends given the raw material prices remaining exorbitant high.

Okay. Then coming to Semperseal another company which went into the negative territory on the EBIT line in the fourth quarter. So you started -- or you will start with a new plant in the U.S. So does the current headwind coming from the raw material side at the ramp up of a new plant -- should we expect that the impact on Semperseal will remain negative for the coming quarters?

For God sake, no. That clearly no. As you know, maybe it's a bit distorted over the last several quarters. The fourth quarter in Semperseal is always affected by, if you like, seasonality. So this plus the U.S. project together has shown its effect, but we have put a lot of strength and effort. And then Christian can also say a couple of words to the new production side. So we clearly expect this is not the new normal. This is actually the old normal being the trend of the seasonality.

Yes, the new normal will be that we are producing bigger volumes in the U.S. rather than in Europe only. So that's definitely an improvement coming from the logistics as well as a service level standpoint, and that will be mirrored in our financial performance as well.

So this does not mean that you are having some kind of a ramp-up cost in the first year and then going in is a positive territory, but will have a positive effect from the start, more or less?

We have a very careful -- we have very cautious ramp up, but we don't see any negative ramp-up effect as such. But it's -- we do it in a very cautious manner as you can imagine, given the dynamics of transportation and yes, the overall situation globally. But there's no negative anticipated effects.

And the next question, of course, to the new CEO, welcome by the way. Sempertrans, Semperform and Semperseal, in combination made an EBIT of approximately EUR 70 million last year. So -- and this is less than corporate costs and others. Do you think that this is some kind of a yes, good combination there? And how do you like to change that? I think it makes no sense to have a corporate cost and other line with EUR 20 million, which absorbs more than the income of 3 out of 4 major industrial segments. What is your opinion on that?

Yes, you realized Seal and Form was split just approximately a little bit more than 1 year ago. And therefore, both divisions needs to be developed further. And of course, in our M&A strategy, we look what fits into this direction. Corporate costs that's always a topic. And especially now with, let's say, the uncertainty of the future, we need to look into the corporate costs constantly.

Just as an addition, as Karl Haider only took the helm in January. Corporate costs are clearly affected by our M&A projects. I said it before, by IT transformation, the office move and so forth. So this you could take as a separate downward effect.

Do you think you will go below EUR 20 million this year?

Will very much depend on our M&A projects. So actually, if you allow me now to say, I hope not, and then we have been very successful on the M&A front, but might not be the answer you're looking for. So in general, it very much depends on the success of our M&A strategy.

Then I have the last one is on Semperflex, doing very well. Of course, entire demand is doing good, I think. Can you say something about the volatility of call off and the current utilization of our plants?

Yes. I mean we are pretty well utilized. We have -- as you may recall, we have ramped up more capacity in 2021, and we are pretty well utilized, not overutilized, but we have a very healthy outlook on that.

And the volatility of the call offs?

It's pretty stable. It's -- for the time being, it's stable. I mean we -- the horizon on that is very, very short as one can imagine. But for now, it's still.

So a lot of in same problems like the Tier 1 player for the passenger car OEMs have?

No comparison.

The next question is from the line of Sven Sauer from Kepler Cheuvreux.

Very quickly, a few questions from my side. I was wondering, what are the regional differences you mentioned regarding the order book at Semperflex?

The regional differences I've mentioned before, was referring to the ASP of Sempermed. I think other than this would not speak about regional differences.

On the Slide 6, for Semperflex, it says order book and revenues exceeded pre-corona level despite regional differences. So...

And now, Mrs. Preining.

We will be right back.

Yes. This refers to the pickup after the shorter -- the slower markets that we saw in the earlier years. So Asia is slower picking up than Europe, for instance.

Okay. Great. Then a question on Sempermed. You also mentioned that the capacity has now increased because of the new plant and you also provided a figure, for future growth capacity would increase by 18%. And I was wondering, is this -- I mean this is based on the yearly production capacity? So 2022, you have an 18% higher capacity than in 2021?

Basically there are 2 elements to capacity here. One is the as we mentioned before, the OEE, so the uptime or the efficiency of already installed capacity and then there's the addition of new lines. So both contributes to a totally increased capacity for the med sector. But yes, a significant share comes from the P7+.

Okay. Great. And my last question is regarding something that you mentioned in the press release, but you didn't mention in the presentation that you see an increased risk of cyberattacks due to the Russia-Ukraine conflict. I was just wondering, is this becoming something I mean, very relevant for Semperit? Have you already been exposed to something similar? And are you planning to invest in IT? And if it is becoming a significantly higher risk for the group?

It's a very good question. As you might have also heard from the press, this war is not only fought on Ukraine soil, it's also fought in the Internet. And this goes 2 ways, it's not only that the Russian hackers are focusing on Western government bodies or companies, it's also that Western companies are focusing on -- Western hackers are focusing on Western companies doing business with Russia. So this is not a Semperit topic. This is a global industry topic. I think everybody who is involved in IT and also, therefore, has a cybersecurity department, which we do clearly also have is seeing the increased pressure and the attacks that are globally running. Semperit as an international company is clearly focusing on that risk. We have an increased project or we have basically increased our spending on that project to keep Semperit as secure as possible. Partially, you have also seen that in CapEx. And this is, unfortunately, I have to say something which we see in the entire industry. You also have seen that over Christmas, I think the vast majority of all IT departments have been very busy to [indiscernible] threat which we had worldwide. So the answer to your question, this is not a Semperit topic. Yes, Semperit takes care of its ground tools, of its data very much. So when it comes to cybersecurity and therefore, also invested to keep Semperit secure. I think like any other company, we are -- we can only be as good as it gets, the hackers are always advanced. And this is unfortunately, if you like, a cost block that came to stay. So we will see that in the upcoming quarters and years as a fixed cost block, but this is nothing -- has nothing to do with Semperit -- it's a global development.

We have a follow-up question from the line of Markus Remis from RBI.

Yes. Firstly, a follow-up on the earnings walk down you've provided, I guess, it was Slide 16 or 17? When you said about EUR 290 million and EUR 292 million of the positive pricing effect relates to the Med segment. So if I add that to the EUR 150 million of EBITDA, the segment generated last year, it gets me to EUR 440 million, roughly. That compares to around EUR 300 million of reported EBITDA in Med.

I think it's a misunderstanding, it's if I may say -- sorry for interruption.

Yes, please.

And that's included. I think you cannot add. That's for the -- Page 17, it's the group -- the bridge from EBITDA 2020 to 2021 on a group level.

Yes. But you said EUR 290 million out of the EUR 316 million of price effect, was related to the Med segment? I think that took us down.

Correct. But you cannot then add it to the segment EBITDA.

Okay. Maybe we can discuss it then bilaterally. Can I then follow up on the corporate cost topic. I mean, if you dispose of Med, how much of your corporate costs will go with the segment?

Okay. So we could hardly hear you now. So the first question, I think, where we lost each other is -- this is included in the Sempermed top line, right? So that volume, we usually have volume and price effect here, we have a clear price effect. And then you got interrupted and I could only hear corporate cost, which would not I thought the first question. Could you please repeat that?

Sorry. But on the corporate center, I mean, if you dispose of Sempermed how much of your corporate center costs would go with the segment?

Please understand that we will not share this kind of information.

Right. Okay. Can I then ask on Flex specifically asking about the fourth quarter where we saw quite a strong top line. And I mean, seasonally, Q4 is also always a bit weaker. But this time, Q4 was actually the strongest quarter. Is that already driven by the new capacities or is this mostly a price effect?

Very much driven by the capacity. So DH4 that came on stream.

Right, okay. So that would be then a good run rate for the coming quarters or is it the starting base?

Of course, there's a price element. It's volume and price.

Yes. Okay. Can you maybe help us understand on the pricing side in general. I mean how much of say, mechanical revenue uplift we should expect next year from the price increases you've already been communicating to the market?

I mean this is strictly driven by raw materials. So that is -- I mean, making guestimates on that right now, we can't do that.

Mr. Remis, have you finished your question?

Yes. Okay. Last question, sorry, tax rate. Any indication you can give us for the current year?

I would assume you mean EBITDA, right?

No, no. The tax rate for 2022...

Tax rate, sorry.

Tax rate, it was pretty much all over the place in recent years. So anything that helps us in our modeling would be appreciated?

As a -- now it's pretty much, I wouldn't say outside my comfort zone which is clearly not, but 17% to 19% would be a fair guesstimate.

In the interest of time, we have to stop the Q&A session, and I hand back to Petra Preining.

Thank you very much. Thanks for all your questions and your interest. We hope that we could have answered the majority of your question. And I hand over to Judit at this point in time. Thank you very much, and goodbye from Vienna.

Thank you, everybody, for participating in the call. Should you have any other questions that remain unanswered, then please get back to me either via e-mail or just give me a call. Thank you very much for your interest.

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.