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 report on the first 3 quarters of 2023. [Operator Instructions] I would now like to turn the conference over to Karl Haider, CEO. Please go ahead.

Thank you very much, and good afternoon from Vienna, and welcome to our results presentation on the first 9 months of 2023. We appreciate your interest for our company, Semperit. . As always, with me in the call is our CFO, Helmut Sorger, who will take you through the financials in some minutes. On this occasion, I would like to start with a brief strategy update, present to you and revised ESG targets and provide an operational review of our 2 new divisions, Semperit Industrial Application and Semperit Engineered Application. The first chart on Slide 3, we'd like to summarize the starting point of today's strategy update, as we have delivered on what we have promised before. With the acquisition of Rico Group announced in April, we took a step forward towards transformational growth and announced the completion of the takeover on 31st of July this year. Exactly 1 month later, the sale of Sempermed was completed, the so-called closing one, and our shareholders were able to benefit from the sales through a special dividend. Remember, we are still in a contract manufacturing situation for our surgical gloves. We produce it for the new owner, HARPS at cost for some years. Most importantly, I can report today that our refined strategy is on track, and we confirm our guidance, which I will come to later on. Over the page, we show the new divisional structure, which involves around Semperit's 2 main business models, one being the commodity-driven, highly standardized [ molding ] business of Semperit Industrial Applications where we aim for cost leadership and a high degree of unification of products, process and equipment, supported by sales excellence. The other being the innovation and technology-driven Semperit Engineered Application, with a high level of customization and a focus on attractive niche markets. In contrast to the commodity-driven business of Industrial Application, here we are predominantly dealing with high engineered product business, and in belting in the tender business, and have the sales team strongly involved with our customers and their needs. This new divisional structure aims to reduce complexity and to scale up our business for future profitable growth. The chart on the next slide illustrates how we want to take the company into the 2030s based on 3 main pillars: operational excellence, strategic initiatives and continuous innovation. At the time of economic uncertainty and top line pressure, our operational excellence program focuses on rightsizing overheads, efficiency enhancement and midsized projects on automation and digitalization. Helmut will expand on that later on. Looking beyond the current economic slowdown. However, we take strategic initiatives for substantial organic growth, like the DH5 plant in Odry, Czech Republic, complemented by inorganic growth project we've diversified the company, and at the same time, pursue active portfolio management. The important point to make here is that the aim for geographic expansion underpins our global growth ambition. Close to my heart, as the CEO of the company, is innovation to support future business development. Here, we are having a well-filled pipeline and focus on new products, as example, with recycled or bio-based materials that fit well with our strategic ESG commitments. At the same time, we are setting new KPIs for reporting and enhancing transparency. Part of our refined strategy is also to develop a more open corporate culture, where our employees feel highly valued, inspired to make changes and support diversity and inclusion. Turning the page, and looking into the separate businesses of Semperit, Industrial Applications in greater detail. For hoses, I would like to highlight the aim for cost leadership and an enlarged product range. The capacity expansion at our DH5 plant is not only crucial to maintain our global market leadership in hydraulic hoses, but at the same time, will set a new efficiency benchmark for cost leadership, which we plan to roll out to other plants as well. In addition to expanding our competitive product range, we also focus on new applications, such as peristaltic and concrete pumps. As to profiles, while we want to maintain our strong position in Central Europe, we plan to expand towards other regions such as Scandinavia, and also increase our footprint in North America in the industrial and construction markets, both to become the leading player and to enlarge our customer base. Important to note here is that our product positioning, engineering and pricing are based on article classification, such as volumes, engineered specifics and projects. From an ESG perspective, we started to use a portion of reclaimed materials for the development of ethylene, propylene, and diene monomers rubber, so-called EPDM. We are on the road of marketing this innovation and are concluding our first customer cooperation agreement. On the next slide, let me highlight the main strategic ambitions for each businesses within Semperit Engineered Applications. Belting is currently doing extremely well, and we aim to exceed global market growth without expanding our existing capacity by concentrating on the operational side and efficiency. We have a coherent product strategy. Based on heavy and medium strength steel belts as well as performance textile belts, and we will focus on strategic partnerships with international mining groups to increase our market share in mining application, excluding Lignite. With the Form the combination of portfolio streamlining and margin accretive product market combination should help to transform this business into an even more attractive and profitable niche operation. This can be scaled up through the extension of end-to-end application know-how in order to grow in our customized product market combinations. And of course, by automation and streamlined cost as well as the geographic expansion within Europe, but also in the Americas and Asia. Finally, Rico should become our engine for organic, and later, possible also inorganic growth with its focus on Internet technology, innovation and attractive growth niche markets. Since the announced acquisition in April, we have continued with the production extension in Thalheim (AT) and we aim to expand in the future new inorganic bolt-on growth opportunities to leverage our tooling expertise in Europe, in the U.S. and potentially, Asia Pacific region. As the CEO of Semperit Group, I'm very encouraged by the integration of Rico so far, and all the support we have received from our new colleagues. The production extension of Rico's headquarter in Thalheim is on track, and we have expansion plans for the U.S. and Switzerland. Turning now into our revised ESG targets on Slide 8, which we had to adopt due to newly involving divisional structure, notably, the sale of Sempermed and the acquisition of Rico. Below, we list some of the revised targets for energy while continuing to additional reduction for 2030 as well as the ambition to further improve our health and safety record and to increase female employment and in leadership. In this context, diversity and inclusion has become a new focal point of our ESG strategy. Please note that only a few days ago, EcoVadis recognized our effort with the platinum award for sustainability performance for the second time, which is a great achievement as we rank among the top 1% of more than 100,000 companies assessed. As to the widely discussed supply chain screening, we have also set a more ambitious target of 75% total spend to be covered by EcoVadis by 2030 to improve our sustainability footprint further. For the next 2 slides, we list some relevant ESG initiatives as specific examples to illustrate the scope and depth of our current efforts. I had mentioned the DH5 plant in Odry, Czech Republic on several occasions before, and would like -- which I'd like to add here that the hose production will be explicitly powered by renewable energy. The new production facility requires neither oil nor gas as an energy source, and a considerable part of the electricity demand will be covered by our photovoltaic system. Then talking about profiles earlier, that is also upgrades our recycling effort through reclaimed waste and scrap from vulcanised EPDM. This should help to continuously integrate our own waste into a new life cycle and keep the external internal recycling rate as high as possible. Overall, we set high priority to the integration of ESG into our decision-making processes and are implementing numerous initiatives to raise awareness among all employees. On the next page we highlight, among others, the increased focus on diversity that is more and more becoming a major pillar of our management effort. We have established both global counsels for age, gender, culture and disabilities and introduced several initiatives for each site. Finally, this cleans up for the direct installation at our production sites, ranging from Germany, Czech Republic, Austria, China and Thailand. With this it means we can cover more than 10% of our energy demand, and help not only to reduce the electricity bill, but also to mitigate climate change. Let me now turn to the operational review and start at Slide 12, Semperit Industrial Applications. As we anticipated and discussed in previous calls, the market environment has continued to deteriorate, particularly for construction-related products due to the weakness of the construction industry. In the wake of further inventory reduction, lower sales growth and volume demand, sales for the division were down by 24% year-on-year, and EBIT by 43%. For the hose business, we faced a low order intake and backlog due to general economic slowdown and customer's very cautious inventory management. Similarly for profiles, where we can still not observed any relief in the construction industry. While we're reporting this new structure for the first time, a 10.2% EBITDA margin for the isolated quarter, quarter 3 2023 is something to watch, and we have taken measures to further enhance operational efficiency and cost saving, which also includes the rightsizing of headcount. In this context, and also we are encouraged that our cost-saving measures have started to take effect, and we see first positive signs in our gross margins. Over the page on Semperit's Engineered Applications. Here, we were able to enjoy a much better macroeconomic backdrop with Belting still benefits from the strong demand in the mining industry. There was also some tailwind from the ongoing European energy crisis, which resulted in strong order intake and backlogs. The order backlog from Form was somewhat more mixed, with pressure from the construction industry but very good demand for special applications. Demand for Rico Group products, also the right depending on the specific product range. While health care and food show stable strong demand, and the mobility segment also remained at a high level, the segment assigned to construction faced a decline. Rico's included in the figures for August and September. The contribution to sales amounted to EUR 16 million. However, the contribution to earnings was more or less flat due to the impact of the recognition of anticipated profits in the purchase price allocation and related transaction costs for the deal. Adjusted for these effects, the EBITDA contribution would have been EUR 3.6 million higher. Overall, this resulted in a top line growth of 22% year-on-year and EBITDA up by 46%, largely driven by Belting. Let me now hand over to Helmut to take us through our financials.

Thank you, Karl, and welcome to everybody this afternoon. I start on Slide 15, with the main financial highlights for the first 9 months 2023. From my perspective as the CFO of the company, we have proactively adjusted our financial operation to our strategic needs as early as the end of the first quarter of 2023. We have previously talked about that. Since then, we went into new modus operandi of lean management and overhead reduction to ensure a sound operation leverage. Most importantly, our focus is on cash management and remains crucial more than ever for the implementation of our industrial growth strategies. With the acquisition of Rico and the sale of Sempermed completed, our balance sheet structure is now more balanced between equity and debt, with net debt being at EUR 98.5 million as of September 30, 2023. As another sign of the strength of our balance sheet and management confidence to navigate through economic uncertainty, we paid the special dividend of EUR 3 per share in September following the sale of Sempermed. At this point, let me emphasize that at the beginning of this year, we stated the cost savings program. And as mentioned during our half year 2023 call, we've initiated further overhead savings to optimize our cost structure. The disciplined cost-cutting programs introduced have already reduced expenses by a total of EUR 2.7 million, of which about 85% was attributable to personnel expenses, and the remainder to other operating expenses. Overall, we assume a run rate for savings of more than EUR 10 million, by already defined and established cost-saving measures which will be fully effective in 2024. This will also help us to offset cost increases at other ends of the business and to weather market -- headwinds from the markets. Over the page, we show key financials, KPIs for the first 9 months of 2023 compared with the same period last year, and adjusted for our recent portfolio changes. I already discussed top line and EBITDA performance of the divisions. So suffice to say here that we -- that while the revenue decline in [indiscernible] could be partly offset by the tailwinds at [indiscernible] the decline in EBITDA was higher. In this context, please note nonrecurring effects of around EUR 6.6 million that originated in part from the Rico acquisitions with transition -- transaction costs of about EUR 3 million as well as rewinding step-up effects from the purchase price allocation of about EUR 1.1 million as well as higher severance payments in connection with changes in the management Board and the restructuring of personnel. Further down the line, EBIT has been impacted by higher depreciation charges as a result of the first-time consolidation of Rico Group. While the financial result has slightly improved year-on-year, the effective tax rate was significantly above last year's level, which is mainly due to the recognition of taxes, including from previous periods as a result of changes in the Polish corporate income tax regime and the nonrecognition of deferred tax assets on tax losses of group companies. The free cash flow before strategic growth investments for the first 9 months of 2023 amounted to EUR 111 million after a negative EUR 19.6 million over the same period last year. This is mainly due to the proceeds from the sale of Sempermed, and the free cash flow was used for the Rico acquisition as well as the payment of the dividends. CapEx for our strategic expansion projects in Odry and at Rico in Thalheim, amounted to EUR 17.5 million. So the overall CapEx, also including maintenance, was at EUR 38 million, which compares with EUR 41.8 million last year, that still included EUR 15 million CapEx for commissioning of the P7 plant expansion in Kamunting, Malaysia. If we look at the revenue and the quarterly EBITDA performance at the next page, the 7.7% year-on-year top line decline converted into margin pressure as lower order intake, customer inventory corrections as well as the general economic slowdown, left its mark on our performance. While price levels, cost of materials and logistics costs remain supportive, volume development has been impacted in line with our expectation and as we had communicated before. Hence, our continued focus is on simplification, on lean management and on operational efficiency and operational excellence to achieve a more competitive cost base. This not only involves increasing the level of automation in our operated and administrative processes, but also streamlining our ERP landscape for a higher level of digitalization. And we can already show quick wins from projects in invoice digitalization and automated order processing, just to give you examples. When allowing for the one-off expenses and the effects of the purchase price allocation at Rico, we are actually encouraged by the EBITDA contribution from Rico, and remain very positive for the next quarters. Adjusted for one-offs, Rico's EBITDA contribution for the first 2 months would have been around EUR 3.6 million, as Karl has already mentioned before. Overall, one-off effects on EBITDA amounted to EUR 6.6 million, also including onetime severance payments for changes in the executive ports and the reduction of headcount. When compiling the last 12-month revenue development for our Industrial business, starting from the first quarter 2020 and plotted against the EBITDA margin for the same period, now on Slide 18, we see a consistent top line growth since the first quarter, 2021, having reached its peak in the first quarter '23. At the same time, there was a continuous improvement in the EBITDA margin with a time lag of about 1 year starting in Q1 '22, and renewed pressure from the second quarter of 2023. This provides us with confidence that our new structural and cost measures will not only result in better operational leverage, but ultimately in a more profitable and over the long run, growing business. On the next slide, I would like to provide the EBITDA average, providing the major moving blocks for the EBITDA year-on-year analysis for the first 9 months. At the beginning of the year, we clearly benefited from price increases introduced step-by-step during '22, but this was not sufficient to offset the volume decline as a result of lower order intakes. Lower inventories also added downward pressure. On the positive side, what made a real difference were lower costs for materials, purchase services, to some degree, energy and on a year-on-year comparison, certainly, in logistics costs that normalized this year. We still faced, as we had previously explained, headwinds from higher inflation, particularly in personnel expenses. Given the first-time consolidation of Rico Group, we singled out operational EBITDA contribution of EUR 3.6 million. We have also singled out here the EUR 2.7 million cost savings, which we will track now on an ongoing basis. These 2 latter positions compare with EUR 6.6 million one-offs for the recall acquisition, the aforementioned rewinding of step-ups in the purchase price allocation, and the other personnel measures I have mentioned before. In total, EBITDA was down 29% year-on-year, with the main drag coming from volumes and the change in inventories. Over the page, we present quarterly CapEx developments since the first quarter of 2022 -- '21, I'm sorry. For year-on-year comparison, please bear in mind that last year's organic investments also included the EUR 15 million for the P7+ plant expansion in Kamunting, Malaysia as we remained a responsible owner and stakeholder of Sempermed facilities, right up to the closing of the sale of that business. Since 2023, we are now showing growth projects and maintenance and small growth projects in different colors, which would then help to understand how we arrive at the free cash flow before strategic growth projects on the next slide. For your convenience, we also show the EUR 144.9 million, which so far paid for the Rico Group in the first 9 months of 2023. For year-end projections, we've shifted some of the capacity expansion works for the DH5 plant in Odry, Czech Republic into 2024. Overall, our CapEx budget implies roughly 60% for maintenance and small growth projects, and 40% for future growth. Moving to Slide 21, and following on from the CapEx split we have just explained. Free cash flow for the first 9 months of 2023 was supported by EUR 42 million of operating cash flow mainly due to active working capital management as well as the proceeds from the sale of Sempermed. After taking the proceeds from the sale of Sempermed, together with maintenance CapEx into account, we arrive at the free cash flow before strategic growth projects of EUR 111 million. For the latter, total proceeds were essentially used for strategic growth investments at the DH5 plant in Odry, the expansion of the Rico plant in Thalheim as well as the acquisition of Rico Group and the dividend payments. Turning the page chart on working capital developments show that we have now come to a more consistent run rate, with trade working capital as a percentage of last 12-month revenues, going slightly up quarter-on-quarter but being in line with the third quarter of '22. The development of the working capital also reflects the initial consideration of the Rico Group. Finally, on Slide 23, we'll update you on the balance sheet and financial profile for the first 9 months of 2023 compared with the year end '22. We continue to have a strong balance sheet and a good cash position, with cash and cash equivalents amounting to roughly EUR 160 million. From the EUR 360 million financing arranged in March 2023, we have used so far EUR 150 million for the Rico acquisition in July, and another EUR 15 million for the DH5 expansion in Odry. Our net debt position at the end of September was EUR 95.8 million after showing a net cash position at the year-end '22. The equity ratio stood at 41.7%, and shows the shift in balance between equity and debt in our capital structure compared to an equity ratio of 61.5% at the end of '22. With this, I finished my part of the presentation, and I would like to hand back to Karl for some closing remarks.

Thank you, Helmut. Let me finish our presentation with the management agenda and outlook for the year-end 2023. As we are in the process of implementing our industrial strategy with a distinctive focus on 2 competitive business models, as outlined before, we keep our focus on profitable growth while managing the current economic downturn. The ongoing top line pressure we try to address full share of wallet gains and cost programs, as Helmut just highlighted. In this context, the key focus remains on simplification, lean management and operational efficiency. Over the midterm, we aim to set up a new growth platform for technical solutions and cost leadership. Finally, on Slide 26, let me confirm our EBITDA guidance for 2023, at EUR 70 million, which is at the lower end of the guidance range, as previously communicated already. Due to phasing, various CapEx programs in 2024, CapEx for this year is expected around EUR 20 million -- EUR 70 million, excuse me. At this stage, especially due to the current low visibility, we do not provide any detailed outlook for 2024. With this, we've come to the end of our presentation, and Helmut and myself are now happy to answer any questions you might have.

[Operator Instructions] Our first question comes from Markus Remis from Raiffeisen Bank International.

First question relates to the Hose business. If you could maybe just comment about lower order intake backlog a bit into perspective and help us understand the magnitude of the of the decline? And maybe related to that, does it have any impact on the balance sheet page at Odry? Are you kind of finding a slowdown because the market wouldn't be there for any additional capacities anyway or it will be irrespective of current trading conditions?

Thank you very much, Mr. Remis. Hose business, you know there is a link to the construction business, and everybody knows the construction business is suffering as we speak. And the order intake we see since quite some months, and you need to realize, according to the COVID situation, according to the supply chain situations, our customers are overstocked already in 2022. And this overstocking affects our business this year, and we still believe the overstocking will not be finished by end of this year. And certain products, let's say -- certain products are still overstocked in our customers, and therefore, we are suffering with low orders. And to meet the time is coming with the construction from that point of view, we see a similar trend that we're having now, let's say, over the winter. And then it would be, I guess, to say something about, let's say, March, April, May next year, but construction is always doing better when the winter is over. Expansion ordering. Of course, we check very carefully and we have a little bit of different phasing now because we need to be clear about our cash as well. Therefore, we have still the plan to finalize all the exhibit. It's the most modern, energy-efficient facility that you can find in the world. We are not giving up on these ambitions. We want to have this because we know the Hose market is a typical market, and it will come back and we need this facility. We have to stick to the investment, but of course, we optimize our cash out as we speak.

And Markus, just to add from my side, you mentioned the order intake. Of course, an interesting observation is we're basically right in forecast with what we've seen. I think we prepared you well on this. But at the moment, another interesting effect is customers have little incentive to place long-term orders because, of course, they count on some suppliers being able to furnish we've already seen that in '22.

On the general demand picture, are there -- do you have any plans to go to take out capacity? Or have you already taken out, I don't know, some shifts of certain capacities in the wake of the cost savings program?

A good question.

On any business line, I mean.

Yes. Here we have, I think, always the duality of the reality. As we have the Industrial Applications business is suffering more from the construction related, let's say, customer base versus the Engineered Applications. And in Industrial Applications, we reacted early enough to downshift in different lines to optimize the cost base. We have done this, I would say a month ago. We have done this recently because it was necessary to adjust our capacity to the order book. And in other businesses, we are running flat out 21 shifts for the next couple of months. From that point of view, again, this is the reality in our business.

All right. Okay. On the cost savings target, just to get that EUR 10 million, right? I mean, first of all, is there more savings to come? So will the run rate increase? And also to get the sense of the timing, I mean up to when is that EUR 10 million to be fully P&L effective? So I understand, 2.7%, it was in the first 3 quarters. How should we think about the timing of the remaining?

It's a very good question, and we say it's more than EUR 10 million run rate. But I think we've said it on previous calls, we want to over-deliver and not overpromise. So clearly, we have defined savings. They are already in implementation. You will certainly appreciate that there's a time lag with them due to notice periods that has to be observed. But we see -- we are very confident that we can deliver the EUR 10 million run rate in '24, and more than EUR 10 million, I think, is a feasible statement. I'll leave it for interpretation now how much is more than that EUR 10 million, but you can see the EUR 2.7 million is already P&L effective in the first 9 months. And this is over and apart from [indiscernible]. We are not measuring here in this EUR 2.7 million the adjustment of shifts that Karl has previously mentioned, yes. But it will be, of course, effective on EBITDA.

Can we expect any further one-offs in the fourth quarter?

No. I mean we don't have big M&A transactions planned.

Coming back to the operational business. I think at least most industrial companies claim that the prices are still holding up reasonably well. How is it with Semperit business units? And maybe you can provide some granularity on the various businesses?

Coming back to the strategy, as I said, in the Belting business, it is -- the site is still ongoing, good investment of our customer base. From that point of view, we are very nicely loaded, have a very nice order book and good outlook. In our Form business, we have part which is a little bit related to construction. Here, we are having also lower order intake, but other parts, as I said before, we are running 21 shifts on most machines. Rico, I said as well, we have a smaller part, as example, showerheads. When building a house, if you're not building a bathroom, then you don't need a showerhead. I think there are certain things are less demand, which are clearly construction market. But, as I said before, health care, some machines for households, they are doing extraordinary well, I would say. And mobility, these are a little bit different in Europe than the U.S. U.S. quite reasonably good, I would say. In Europe, looking at it, it's a little bit different than the U.S. [indiscernible] in houses as I said before, -- this is construction mix. Helmut?

We've talked about this business before. I mean this is a commodity business, and we play by the rules of the commodity business. So what we are trying to do is prepare ourselves to gain share of wallet. I mean we have to clearly state that, but market headwinds are market headwinds, and we're not the only ones facing them. But these times will go over too. So I'm not in the long-term pessimistic at all.

Our next question comes from Christian Obst with Baader Bank.

Yes. So I quite get some kind of a sense of how the normalized business, we were going forward. So first of all, when it comes to corporate costs. We are now close to EUR 20 million. And we have onetime Rico cost you mentioned, the EUR 6.6 million, which should not occur again going forward.

Sorry to interject, the Rico transaction cost was EUR 3 million plus EUR 1.1 million, not the full EUR 6.6 million. The EUR 6.6 million has some effects from personnel changes from -- not related to Rico.

Okay. But on the Page 7, the onetime expenses of around EUR 6.6 million from the transaction cost for the acquisition of Rico.

Okay. Part of it is related to the acquisition and initial consolidation of Rico, but just a part of it, Christian.

Okay. So the end of the question mark is, what do you think, given any kind of sense what will be a normal quarterly corporate cost when it goes into the next business year?

At the moment, we are accomplishing 2 things. We are on this overhead cost reduction program. A part of it already is reflected in the corporate cost. But please bear in mind that we've just sold a huge part of our business, of our revenue base. So what we are doing as well is compensating for this with cost reductions. So you see flat over corporate expenses, but in effect, this is covered by savings to a large degree because they are not charged out to the medical business anymore. So we are actively combating this stranded cost situation. And I mean we are doing -- we are actively investigating measures to further reduce corporate expenses. But these have certain time lags and are connected to our digitalization efforts, too. You had mentioned our one ERP project, the ERP harmonization, which will, of course, have a significant impact on us.

But at the end, you give no real guidance for where this will come out in the next year?

Yes. Yes. Over the course of the next year, I think, you will see a picture there.

Okay. But when it comes to the remaining search vehicle operations, which is minus EUR 7.1 million after 9 months. If I am absolutely right, going forward, there should be some kind of a cost-plus business. Can we expect there a breakeven from the fourth quarter and going forward?

So the EUR 7.1 million is, of course, a combination of the losses of the first 8 months. And we are in a contract manufacturing and at cost. That means we forward the cost position. And so it will be -- cost out will be neutral at the end, yes. We don't see this last very long.

No. Our ambition is to have this business cash neutral, which requires a slightly positive EBITDA.

Okay. And can you give us any kind of guidance how the operating cash flow and free cash flow might be in the fourth quarter. And when I saw it right on the page 12 in your report there, you mentioned that the free cash flow before strategic growth investment was approximately -- was EUR 111 million. But does that really also include the financing activities?

No. This -- the large share is, of course, our operating cash flow, the EUR 42 million, plus the proceeds from the sale of the Medical business.

Okay. But the underlying free cash flow, what do you think what Semperit can deliver going forward? Any kind of guidance? Or should we wait until the end or beginning of next year?

You know how it is with the fourth quarter. Everybody is optimizing working capital. And so are we. So every guidance of a normal Q3 is probably not appropriate for the fourth quarter, so.

I really don't want to give a guidance on this, yes. But I mean it's -- you can normalize it basically from our EBITDA guidance pretty well.

Our next question comes from Sven Sauer with Kepler Cheuvreux.

I have just 3 questions. I was wondering, since the construction industry is impacting both of the segments, could you just quickly remind me the total group exposure to the construction industry?

It's a good question. Any number which I would say in detail would be maybe not completely correct from that point of view. But of course, you know our wholesale goes into agriculture. It's a little bit of different dynamics when it comes to our construction [indiscernible] and growing the [indiscernible]. Profiles is there, and it is the main exposure that we have in construction, in Industrial Applications. In Engineered Applications, we have only some sealings business, which is more or less in concrete pipes, et cetera. But it's a smaller amount.

And of course, in the profile business, we have 2 effects. One, I mean the profiles ended the ones going into windows to fade systems. As key element to the insulation. And of course, it's impacted by new build, and we've seen that impact already in Q4 '22. Our core market is, of course, Germany, Austria, Central Europe but we're trying to expand that market, yes. But we were impacted relatively early in there. What is some kind of an upside is if you have some installation of new windows and you want to replace it. So the renovation business. But of course, this will never compensate the newbuild activity.

Okay. Moving on to the next question. Now that Sempermed has been sold, and Rico has been acquired, and strategic positioning is complete, and now you have a cost program introduced. And I was just wondering, I mean, obviously, you're not going to provide a figure now, but wondering if any time soon, in the next couple of quarters, we can also expect maybe an update on some financial medium-term targets, given that the company is now completely different than it was a couple of quarters ago.

A good question, and you realize we are quite happy that we have made this to move because our [ draft ] business was decided earlier to find a new home. Rico fits very well into this, and we have quite some growth plans for our business. But for the moment, it would be too early to give you an indication where we want to be.

Okay. That's good. Great. Then just 2 quick housekeeping questions. The one was the higher tax that you mentioned. Is this a regulatory change that will lead to a higher tax rate going forward? Or was this just in this quarter? And the second question would be the planned CapEx of the EUR 70 million in 2023. Is this including the EUR 15 million that you also invested in the plant for Malaysia? Or is this coming on top? That would be it.

Say the last question again, please, the last part. The EUR 15 million from last year.

You mentioned that you invested EUR 15 million also in the plant in Malaysia.

That was the previous year. That was -- take the EUR 15 million, to give you some better granularity and understanding on the total CapEx for last year, for '22. Yes, that's all -- all gone. And with regards to your question on the tax rate, Yes, this is the interesting situation in Poland right now. Of course, it's legal changes. They changed the tax law. And of course, we are reissuing our tax statements back to 2017. And of course, these are ongoing procedures, and we'll see how long that goes. So this is based on taxes for previous years as well. So for the future impacts will certainly be the effect of the initial consolidation of the Rico group, that will have some impact. Just to bring back to mind, we have tax loss carryforwards in Austria, significant tax loss carryforwards. And with regard to the Polish situation, we're going to have some upside potential there. I mean we're going to refile our tax statements for a reason. We want something back.

[Operator Instructions] Our next question is a follow-up from Markus Remis with Raiffeisen Bank International.

Can I ask you on your average interest rate level at the moment, the share of your fixed debt or price ratio share of the -- around that note?

The fixed debt is basically our short term loan that is outside -- outstanding with the new financing, this is all variable. And give or take 4.5% .

At the moment, this probably is going to go up a little bit? Or is that kind of replacing -- kind of also the phasing in of...

It's an average, if you look at the interest rate and the cash flow statement, you can calculate that was, but I mean for obvious reasons, we did this. We closed the financing on March 31, where the margin situation was a more favorable one than nowadays.

Okay. And do you have general thoughts on the shareholder remuneration? Can you provide us with an update there? Anything, I mean it was always a [indiscernible] I think like 50% payout ratio, but subject to other conditions, but what's the current view? How do you want the market to treat your shareholder remuneration policy?

We have a dividend policy, which is still in place and which is still good. I think this is well known. We basically say we want to distribute -- if we're in a profitable situation from the group, we want to have shareholders participate from this. This year, it looks like we're going to make a negative result. I mean, it is what it is.

Right. So you're taking all the one-offs also into that dividend base, right? It's not on an adjusted net income.

No, the existing policy reflects on the profit after tax of the group. So there's no one-offs or anything adjusted.

Right. Okay. And it is 50% payout ratio in general? Or it's going to be updated?

In general, yes.

There are no further questions at this time. So that concludes our Q&A session. Now I hand back to Mr. Haider for closing comments. Please, sir, go ahead.

Thank you very much for listening to our quarter 3 and first 9 months results. I wish you a nice rest of the day and all the best.

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