WashTec AG (WSU) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the conference call of WashTec AG. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Dr. Ralf Koeppe, CEO, who will lead you for this conference. Please go ahead.

Thank you. Ladies and gentlemen, on behalf of the WashTec Board with my colleagues, CFO, Dr. Kerstin Reden; and CFO, Stephan Weber, who are attending with me the call, I would like to welcome you to the earnings call and presentation of the WashTec Group Financial Year 2021. Due to the pandemic situation, we are still not able to meet personally to our annual press conference. Therefore, we combine the annual press conference and analyst telephone call in 1 conference call. Next slide, please. Before my colleague, Kerstin Reden, will present the figures of the business year 2021 and the outlook for 2022, I will give you some update on WashTec, present some achievements of the last year, including our digital journey. Stephan Weber will provide you with some customer project examples. Finally, we will have the Q&A session with the WashTec Board. Let me summarize our business model to take everybody on board. WashTec is the leading provider for innovative solutions for carwash worldwide. Our product range comprises all types of vehicle wash equipment as well as the associated peripheral devices, wash chemicals and water reclaim systems. As specialists in environment friendly, the heater wash systems, we work continuously on innovations that contribute to sustainable mobility for today and tomorrow. WashTec also offers comprehensive servicing packages and digital smart service solutions spanning the entire product life cycle, including equipment maintenance, chemicals equipment, take back financing arrangements and operator management. Slide 3, please. Certainly, you are interested on potential impacts on the war on WashTec. Let me put this topic first. We are following the war in Ukraine with great concern. As an international company with roots in Augsburg, the city of peace, we condemn the war and our solidarity is with all the people who suffer from this war and whose personal faith is affected in the most terrible way. Families of WashTec employees, like many others, are providing shelter to recurring refugees. We have decided to stop business relations with Belarus and Russia until further notice. The business volume with Russia, Belarus and Ukraine is below 1% of the revenue. We don't have own operations in these countries. And with the current sanctions on the Russian banking and currency system, all projects have come to a standstill. Summarized, the direct impact is rather small. Supply chains may be indirectly affected, as indicated in the daily news. Our task force continues to act proactive and will secure the supply chain with highest priority, as already done successfully in 2021. Slide 4, please. We can look back on a successful fiscal year. Our company generated revenue of EUR 430.5 million with an EBIT margin of 10.6%. Return on capital employed is 25.8%. These figures are an impressive confirmation of our efforts to bring the company forward with processes and operational excellence as well as innovation. On behalf of the entire Management Board, we would like to thank all the employees for their dedicated hard work. We have surmounted these challenging times together as a team. The fact that the strong demand recovery would lead to supply shortages across all material categories in all industry was already expected from harsh economic cycles. We were already prepared for this at the end of 2020 when we set up a task force to work with our suppliers and safeguard delivery schedules for our customers. This requires us to invest considerable resources in procurement, commissioning and development, a huge effort, but one that was necessary and largely successful. Port planning enabled us to deliver and installed system at our customers in Europe and Asia with the usual lead time. However, customers in the U.S. had to accept extended delivery times. Another area of increasing importance for our industry is sustainability. Our customers want future car washes to be environmental friendly. With our automated car wash systems, water treatment and green car care chemicals, we already have the product for this today. We see -- it is our corporate responsibility to constantly improve this and to develop the market in this direction. In the second quarter this year, we are going to publish our first stand-alone sustainability report. We present information about our activities and goals in terms of economic, environmental and social sustainability. Slide 5, please. We have also made great progress in the development of digital services. These smart services are based on our digital platform, myWashtec. We succeeded in both further improving existing services and implementing new ones. From people working successfully in the digital domain, we get the confirmation that our digital platform is a leading best practice example in industry. But digitalization also requires new business models. These are being worked on by top qualified employees at WashTec to identify the future potential of digital services. In the Journal section of our annual report, we showcased a cross-section of our digital offerings, which are closely integrated with our digital machines and sustainable chemicals. We have brought our new products for customers. These include our premium SmartCare product, which we launched in additional European markets. We have also fine-tuned our product strategy for North America. Based on the SmartCare platform, for instance, we delivered first machines for the North American market. These are currently being tested in our U.S. factory and this initial pilot customers. For the SmartCare platform in north America, we have implemented new processes to achieve conformity with the American U.S. standards. With these processes in place, we can certify other products for the U.S. market more quickly. The market introduction of our green car care wash chemicals has been very successful and well received by our customers. Today, more than ever, customers expect sustainable, environmentally friendly choices when it comes to car washing. In 2021, we continue the transformation of these recipes of our wash chemicals, now are 90% engineered to meet the green car care standard that satisfy the stricter screen criteria and well above the [indiscernible] requirements. The standard is continuously checked by the Institute [indiscernible] for compliance. Slide 6, please. As a company, we use data in many applications to drive process excellence. Here, an example of the Sahara dust cloud that emerged this month in Europe. In this example, you can see the correlation of the weather forecast of 15th March and the resulting wash figures for Germany. Our customers, the wash business operators, saw record wash figures in the regions for zip codes 6, 7 and 8. The short-term orders were covered by our inventory and the production forecast was adopted. We had a weekly all-time high order intake in Germany and other countries effectively. I now hand over to Stephan.

Yes. Slide 7, please. At this place, this time around, we like to introduce you a little bit to our activities in the segment of carwash tunnels. Usually, we are known -- predominantly known for rollover carwashes. However, carwash tunnels has always been a part of our business field that is gaining increasing importance in our portfolio. And we have, in the last year, managed to have record order intake and order backlog and carwash tunnels are a significant part of our current all-time high in order backlog. On the left side hand side, you see a nice reference out of the U.S., an interesting project where there is a rollover next to a tunnel. In other words, both pieces of equipment from WashTec at a gas station. Here, in particular, the SL 1 is being used, which is a machine built in the U.S. and predominantly for the U.S. market. We call it the workhorse, a machine that can wash high volumes and is very reliable in its features and simple to handle. On the other side, on the top, you see a Waschpark, and excellent reference from Germany, very interesting project as well. It's called IKL. It's based in Kaiserslautern. And this is the first time where carwash has been in combination with the inclusion project, in other words, in this carwash factory, let's put it this way, there is not only exterior cleaning, there's also interior cleaning. And we have been deeply involved in laying this park -- Waschpark out. And there is also a nice testimonial video that you can find on our YouTube page about this where the customer explains the experience that he has with WashTec over the entire project. And like I said, it's an inclusion project, there's quite a number of handicapped people working there in this Waschpark. On the bottom left, you can see that this -- our display at the November show, ICA Show, the largest carwash show the world in Las Vegas, where we also had, this time around, a high focus on wash tunnel equipment here, in particular, we showed the SL 1, whereby we sell both types of machines, the SL 1 and the SL 2 and the SL 2 was made an outwork and exclusively in the SL1 in the U.S., like I mentioned before. And in the middle, you can see the Tunnel Talk. It is another product of our range that is particularly designed for the automotive industry, in particular, car dealers and car rental companies with a huge throughput. In this case, the cars are not pulled through. The cars are driven through this by specified operators in order to have the short washing cycle as the maximum throughput of cars in these installations. Also there, we have, in the meantime, quite a number of orders in the U.S. in our backlog and already delivered quite a number of these machines. So you can see in the meantime with SL 1, SL 2 and drive through, we have a comprehensive range. And also wash tunnels are gaining importance in the portfolio of WashTec and Mark VII in the U.S. And with this, I'd like to hand back to Ralf Koeppe.

I hand forward to Kerstin, who will present us the 2021 figures and the outlook of 2022.

Yes. Thank you. Hello, everyone. Let's go now into the numbers. Looking at the big picture, 2021, in all respects was a successful year. Firstly, in terms of revenue development, it bounced back from a COVID year 2020 with a revenue increase of 40% up to a pre-crisis level of EUR 431 million. We have delivered in line with our ambition a double-digit adjusted EBIT margin. That excludes a one-off gain of EUR 2.7 million from a waiver of a loan in the U.S. at the time of COVID subsidies, including the one-off gain EBIT was EUR 45.7 million, more than double the EBIT we delivered last year. Adjusted EBIT was EUR 43 million, up nearly 70% compared to prior year. And importantly as well, in terms of cash flow generation, we delivered a free cash flow close to EUR 35 million despite the volume increase in our business. Coming to the next slide to the revenue development by quarter. We started relatively soft into the year as a result of harsh weather conditions and continued COVID constraints. Towards the end of the first quarter, we saw a significant order intake also coming from key accounts and decided to update our guidance for stable revenue development up to growth of over 9%. And as I just mentioned, we actually exceeded the 9%. We had a step-up in revenue of 14%. Looking at Q4, we can see a strong revenue performance. We had a very good business momentum across all segments, and Service and Chemicals performed particularly well towards the end of the year. In numbers, Q4 revenue was EUR 124 million, up 14% year-on-year. This is the second best Q4 in WashTec's history from a revenue perspective after Q4 2019. On the next page, we will find the EBIT development by quarter. We delivered in Q4 an EBIT of EUR 30 million, representing an EBIT margin of 10%. This is not the EBIT level we would like to see at such a high revenue level. However, we have to navigate to disruptions and challenging supply chains. And it's all we could to secure delivery to our customers. As a result, the sales not only higher material costs, but also some inefficiency, which then obviously impacted our margin. With regards to our own pricing, we have reacted swiftly to offset inflation. The first pricing adjustment occurred in May last year. The last pricing adjustment was in January this year. However, there's a time lag between higher cost hitting the P&L and higher sales prices reflected in revenue. And this time lag is caused by [ big factors ], by a significant backlog and the [ selection ] approach that we took with regards to our own pricing and contractual obligations. Until recently, before the war in Ukraine, we were quite confident that our pricing increases offset the cost increase. However, in view of the sharp increases in energy cost and also transportation, we have started to take further actions. Moving on to the next slide, the product performance. We had a strong momentum in equipment sales and services for the various chemicals. In Chemicals, we saw a step up, an increase of 9%. And this despite the stable development last year. The machine sales, including services, we grew 15% and are close to the precrisis levels. To summarize the main drivers of the good EBIT performance, please go to the next slide, where we added an EBITDA and EBIT bridge. The main drop...

We're probably having some problem -- can we just have a 1-minute break, please?

Yes, of course. We will briefly pause this conference call. Ladies and gentlemen, Please stay on the line. We will resume the conference shortly. [Break]

Ladies and gentlemen, thank you for standing by. We will now resume the conference call.

Thank you, ladies and gentlemen, we had a technical problem. Now we continue. Kerstin, please?

Yes, sorry. So I was explaining the EBIT bridge. The EBIT bridge summarizes the main drivers of the EBIT performance. Please refer to the EBIT bridge to the respective slide. The main driver of cost was the revenue step-up and also a better profit, which was mostly volume driven. Selling costs increased mainly because of higher freight. Expenses also in line with the volume increase. We spent more on R&D and worked in particular on platform optimization, the U.S. [ Mark ] and digitization. On the positive side, we could release a EUR 2 million net debt allowance. We implemented a global action plan to improve collection of receivables. Our [ completed ] stake, I added on the following slide an explanation and overview of one-off items of the nonrecurring items. In 2021, we realized a gain of EUR 2.7 million relating to subsidies. In 2020, in -- we incurred a loss, we incurred an expense, a one-off expense of EUR 4.6 million, mostly driven by an impairment. Now I would like to continue with the performance by region. Going down that slide, we saw a strong recovery in Europe and North America. Asia Pacific delivered moderate growth as they continued to suffer from lockdowns. In Europe, we saw a step-up of 14% and in North America of 17%. In Europe, the recovery was driven by both direct business and key account business, a very pleasant development for us here that direct business in Europe reached to precrisis level. In North America, the recovery of key account business, mainly contributed to the strong performance. Including EBIT, please move on to the next slide. From a regional perspective, very strong performance coming from Europe, a plus of 15%. Looking at the development in North America, we see a significant improvement compared to prior year. However, in terms of EBIT margin, the performance was not as expected. The company suffered heavily from the high inflation, disrupted supply chains and had to deal with long-term contracts, which are harder to negotiate to update our own pricing. Asia Pacific was finally back in the black numbers, and this is without subsidies, thanks to -- in particular to the good performance in Australia. A few words on the cash flow and net debt development. Please go to the next slide. Net debt at the end of the year, was a positive EUR 4.6 million, meaning that the cash funds exceeded our bank liabilities. This could be achieved by a strong cash flow generation despite the business expansion. Our free cash flow was EUR 35 million and close to the very good performance in 2020. On the next slide, the net debt bridge explains how we managed to do so. The increase in inventories and accounts receivables could be nearly offset by higher liabilities and mostly by higher down payments. In addition, investments was low, lower than we actually wanted. This was because of long delivery times, once we released investments that was towards the beginning of the second quarter once we noted a significant order intake. Coming to the balance sheet on the next slide, a few comments on the KPIs, which you see here. Firstly, on working capital, in absolute terms, it increased, yes, with the recovery of the business. But if you look at working capital as a percentage of sales, it improved. There's a reduction of 1%. And this again is thanks to our global program to improve working capital, in particular, receivables. With regards to inventory, we took a prudent approach. We did not engage too much in optimization here because we were not focused on securing our supply, so that the improvement mostly comes from the collection -- better collection of receivables. Gross increased to over 25%, in line with our ambition. This came from strong EBIT performance, lower investments and also a bit from the improvement in working capital. Equity was a bit lower than last year but still very healthy, it was 37%. And the reduction relates to the dividend payout. We not only distributed net income, but added a special dividend payment totaling then to a total payout of EUR 31 million. For 2022, as already shared in our ad-hoc release, we proposed a dividend of EUR 2.90 per share, including again a special dividend of EUR 0.80 per share. This means that we propose to continue with our generous dividend policy. Coming to the guidance, the last slide. With regards to revenue, we expect to deliver between EUR 450 million and EUR 470 million. Our EBIT expectation is at EUR 45 million to EUR 58 million. Cash flow will be impacted by higher investments. We invested quite moderately last year and the year before, so we have to make up for relatively low investment. And cash flow is expected to be between EUR 28 million and EUR 32 million. And in line with our ambition, we continue or we expect to continually to deliver the ROCE of over 25%. All these numbers, of course, reflect no further significant repercussions from the war in the Ukraine. As a summary, we look back at a very successful year. We were able to deliver through out the entire year despite all the risk disruptions and generated good business results. Thank you very much for listening. And with that, I would like to hand over back to the operator to start the Q&A session.

Ladies and gentlemen, we will now begin our question and answer session. [Operator Instructions] And the first question is from Alexander Galitsa from Hauck Aufhäuser.

First one, I'd like to ask on higher input prices and how does it tie into your full year guidance. So in 2021, you had a negative effect from higher input costs, mostly in the second half. Would you be able to broadly quantify it, is around EUR 4 million sounds reasonable?

I can take that question. Thank you for that question. For 2022, we expect that around 5% increase will be -- we will be hit by a 5% increase in material prices, for -- with regards to material prices. And I expect that somebody else would like to know how much is the increase in our sales price. And here, we expect around 2%.

Okay. So basically, you're expecting to have net effect post price increases of half what you've been hit with from higher interest?

No. We expect to offset the material price increases by higher pricing. One relates to cost of sales. The other number, the 2% to revenue. And -- but that was before the war in the Ukraine. So -- but we -- as I said, we are working on further actions so that we can offset with our own higher pricing cost increases but with the backlog.

Yes. I'm just trying to understand how prudent or conservative the guidance is if the original expectation was that the cost increases prior to the war in Ukraine, that the original cost increases were or could have been possibly fully offset by higher prices that you have already introduced. And now you're obviously facing with another headwind. I guess what I'm trying to understand is to what extent have you reflected this additional headwinds in your guidance? Because if one looks at the sort of implied incremental margins for 2022, those seem very low at around 12%, which kind of would suggest that the additional headwind is, I mean, it depends how one calculated, but it could be up to EUR 8 million from higher costs simply, post your kind of measures to overcompensate that. Would you say that it's a reasonable assessment that one could see a headwind annualizing over 2022 of EUR 8 million, roughly, if you could follow me on that.

Yes. I can follow on that. That's not so far away from our own assessments. But as I said, we expect to be able to offset this by our own higher costing. However, there is a time lag between those and so we will have an impact in particular in the upcoming quarter.

Yes. Okay. And in relation to that, maybe you can talk a little bit about the ability for you to really increase prices further. I mean you've already mentioned you made one price hike in May 2021, January 2022 was the next one. How much room do you have in the -- kind of if you can talk about your ability to increase prices further.

Stephan?

We have increased the prices 3x within the last 8 months, one in April last year, and one in September -- was effect of September last year and then again in January this year. So overall, by more than 8% actually revenue added up in interest of it. I mean, in total, it totals up to 8% price increase that are in effect now. So in other words, we try to always -- with the signals that we had. But like Kerstin said, some of the orders that we saw in Q4 were already written in Q1 before we even had the first price increase or in Q2. That is the time lag.

Okay. Makes sense. And then I would like to switch to R&D expenses. So you clearly had, in 2020, 2021, in line with your strategy to digitalize and build those digital competencies, you had higher sort of above average R&D costs. As of today, how do you expect this to continue? Do you expect to come back to a more normalized level? Or do you see still necessity to spend more in this area?

So currently, the plan is to stay flat to the figures that we have. And I think this justifies to keep pushing the growth we want to go for.

Okay. And then a couple of questions on the regional -- on different regions. Maybe to start with China. You mentioned that you see the strong trend towards the key account business, especially in the mid- and high-end range. So -- and apparently you found also a way to do business without tying in capital in there. So could you maybe spend a little time discussing what does it mean for you? Is it really major growth opportunity opening up? And how do you see that?

Yes. That's surely it is a growth opportunity opening up due to the nature that these larger players in the market have a certain model, which is more related to pay-per-wash agreements, which we wouldn't entertain on, let's say, by ourselves. In the meantime, we have been able to find partners to do this on our behalf. And this gives us, of course, access to, let's say, these larger orders. And in that sense, yes, there is an opportunity. At the moment, however, one has to say at this current point of view, I don't know how current you are here. I mean, at the moment in China, we have other problems because it's again lockdown in Shanghai and certain cities. So -- but overall, it's a good outlook for us in China business we set up in place, yes.

Okay. Understood. And then maybe changing to the North American market. So you mentioned that the SmartCare is tested with initial pilot customers. How do you see -- when do you expect these machines to play a bigger role in the sales mix? And yes, that would be the question.

Yes. It will be introduced now on the next upcoming ICA show in May. And so yes, we expect that impact, I mean, depending on the supply chain situation where we have constraints. As you can imagine, towards Q3, Q4 next year, we would expect the first impact. Currently, I have to say, as I also highlighted in the sense that as I mentioned during the call, we have a very good order intake in tunnel business, which you might remember, we introduced in 2018. And we have excellent growth there. So that helped a lot last year. And we'll have also this year, largely to come to an aggressive growth in the U.S.

Okay. And could you also spend some time talking about the -- you mentioned that the North American EBIT margin has fallen short of expectations because you have longer-term contracts in an inflationary environment. Could you discuss how long is this situation going to bother you there?

Well, this will definitely most probably bother us over -- about Q1, early Q2, then we should be done with it. And in the meantime, also have made necessary price reductions. As you might be aware, the impact of material price increases has been even more significant in the U.S. than it has been in Europe due to steel issues. Stainless steel prices have rocketed in the U.S. and have an impact. But in the meantime, we have had even more aggressive price reductions in the U.S. than we had in Europe.

Okay. And I think I have just the last one. On chemicals, so you mentioned that you have introduced this clean range, green range of chemicals and that we also entered new markets in Europe. What are your expectations with regards to sort of the longer-term growth profile of Chemicals business? And also wondering whether this has to be kind of in correlation with your equipment business? Or can you actually also do chemical business without really -- so winning new customers in chemical business without having to really install your machines or your equipment?

I mean the majority of the chemicals that we sell go usually into washer equipment, I would say, but it is not an exclusive case. I mean we have also quite a number of other customers that are using our chemicals because of the sheer performance of this chemicals. Nonetheless, we have to say that -- the green chemicals will have to -- I mean the whole issue has been the first one introduced to the market and is providing already good traction, I have to say. We have also been able to win 2 larger accounts just recently with the advent of green chemicals. And in the long term, I mean, we are -- I would say, we are aiming for a high digit 1-digit growth. So in the area of 7%, 8%, 9%, depending how the market is. I mean for example, in chemicals, we also as you might know from the past, since you are experienced in this business, also water -- weather-related. And what Ralf showed, for example, if you had more Sahara sand, I can tell you this business will grow in the 2 digits. That's for sure because we have never seen sales numbers like we are having them now. It has to do with larger revenue since we broke into the business every year. But also with the fact that the last 3, 4 weeks, it's just crazy how people wash cars. So we are always some kind also dependent on weather impact despite all the organic growth that we are producing.

And the Sahara impact would then surface in Q1 2022 in your Chemicals business? Or dust have a...

Towards the end of Q1, early Q2, there or where it is now. I mean revenue-wise, you will see a massive increase in the last 3, 4 months -- 4 weeks in all over Europe, I would say we have record numbers. So yes, surely, in end of Q1, we will see it the most.

Okay. And last follow-up is when we talked about chemicals, so is it broadly you have the same position in Europe or in the U.S.? Or do you mostly focus on Europe?

No. We don't have -- we are not at all the same position. In Europe, we have our own chemicals, so our intellectual property, the recipes and whatever we are mastering the discipline. In the U.S., we have white label chemicals. In other words, are branded but white label and from a third party.

The next question is from Eggert Kuls, Warburg Research.

First one is related to a potential natural gas embargo. So just recently, Russia said that they want to be paid in ruble. And so to what degree this could endanger your guidance? I think directly, it's not that important as we do only -- more or less only assembly in Augsburg, but I can imagine that some of your suppliers could be hit harder. So maybe you can share some thoughts on that with us.

Mr. Kuls, thank you very much for the question. I was already thinking about that this question would come because recently, the discussion is on this. Of course, as you know, we are very proactive in these things. But I would like to answer it more in a general way. When you look at the machining industry in general, you have many processes that require it, generating plastic molds, steel forming and so on. So definitely, if things like that happen, there will be problems in the supply chain. On the case of WashTec, we are currently looking at things where we could replace gas by oil, for example, but it's only a small part, so we are working on things. But as I said, if these things come, the bigger impact comes out of the supply chain, not out of our core processes. That's for the time being. But issue we're currently looking inside.

Yes. Understandable. So very difficult to judge. So regarding your price increases, so I understood in addition to the 3 price increases you have already done, you plan another one? Is that mid of this year? Or when will that take place?

So please understand that we don't give this information beforehand. But what I can tell you and Stephan Weber was mentioning this, but this might be not have been as clear. For example, the rising energy prices for gasoline and so on, of course, we can directly inject in higher service charges. So when we talk about price increases, we talk about material price increases. The energy price increases, it can vary -- transparent gift to the customer. And we've already...

And it's already done.

And it's already done, yes.

Okay. Good. So your sales outlook, I -- my first thought this morning was surprisingly positive, given the current environment. So that implies to me that your order intake must be very good up to now. So -- but regarding your price increases, I wonder where you expect higher prices could dampen demand in the future? What do you think about that?

Let me take the first thing, and then I'll hand over to Stephan Weber. First of all, the high oil price, of course, is in favor of our customers, the big oil companies and key accounts. So definitely, when they look at what the investments to do to come up with the mobility concept and so on, they kind of take profit of that higher oil price situation. But then and over to Stephan Weber to touch -- to give you a more precise answer.

I mean, so far, so good. We have to say, I mean, it is -- I mean, everybody is aware of the higher prices and the carwash business case, as you might know, is a pretty stable business case. So we have -- I mean we are not the only one increasing prices, but what you're asking is eventually these higher prices will lead to a stalling effect on the overall inquiries. We cannot see this off now. We have -- and we are working closely with our inquiry system and we have all the opportunities in the system and our CRM tool. We cannot see an impact as of now that there is anybody refusing to order just because there's a, let's say, an overall price increase. Whether this will stabilize this, this is very difficult to predict. I mean for the time being, first quarter will be very good. And like I said, we have an excellent order backlog carry forward, which is even bigger now. So in that sense, as of now, that's the only thing that I can answer, and I cannot tell you what it will be in 3 months.

Okay. So yes, but through what you said, with regard to the oil company, so we can expect that the share of key account business has risen further?

Yes. Absolutely. I mean it was -- in the year 2020, it was mainly the key accounts, if not only the key accounts that didn't order anymore. And likewise, they are all coming back and are full blown back now. So in that sense, we have in the meantime increased further sales efficiency in direct sales, plus we have now key accounts back to, let's say, a healthy level. And in those cases, together, it leads, of course, to the situation that we try to describe.

Okay. Good. And my last question, you said that you expect CapEx to significant to significantly go up this year. Can you provide us with a figure?

EUR 10 million to EUR 15 million.

EUR 10 million to EUR 15 million, okay. And this is a level we can also expect for the years thereafter?

2023, we have done the planning year, but we'll also see higher CapEx, we expect.

Maybe you should explain the CapEx in 2021 also -- had some orders out machine renewals -- sorry, just a second. We have some orders of renewals of machines that were not delivered. So basically, we have an effect, which we also see as the suppliers of our machining equipment. They have high delivery times, up to almost 12 months. And that's why there is a shift in the CapEx. We had a prudent approach starting 2021, and we were not able to execute the CapEx in 2021 in the second half year as due to this reason, which I just told you.

Just to clarify, you spoke about, again, higher CapEx in '23. Is that compared to 22 million compared to '21? So same level in '23 as in 2022?

Yes.

The next question is from Richard Schramm, HSBC.

Just quick clarifications from my side, one concerning the delivery times. Can you give us, a number how long your delivery times are at the moment for equipment and how this compares to normal delivery times 2, 3 years back?

In the 8 weeks and they are standards. So we have currently standard delivery times. Not all the, let's say, order intakes are scheduled for delivery right away. But we are still able to keep standard delivery times, yes.

In the tunnel business, you sometimes have orders they are due to supply a year later. You have the civil engineering, you have [indiscernible] affected, but we are currently still working with standard delivery times.

That's amazing because the industry is complaining about heavily rising delivery times. So you can obviously completely avoid this problem. Is that correct then?

As of now, yes, but we never know how it is going to be in 4 or 6 weeks. But this is the answer all the while, has been all the while. So as of now, we can supply. And that we are sitting on such a high order backlog has simply also to do that we received many orders from larger customers or in project business where, from the very beginning, clearly, they don't want it in the next 6 months, but they place the orders. In other words, so that's the backlog that we have. Order backlog is not so high because we are unable to deliver.

I was telling this, I think this also a few calls it comes at a cost. We have heavily task force work and we have things that come in on Monday, and they are sold on Thursday. So I'm very proud of the team. And it's not by chance that we have this we have a huge -- it's a huge effort. It's not by chance that we have this result. Just to remember, it's preparation from -- starting from 2020, including electronics and all things. And yes, maybe there's some luck, but it's only 1%, 99% is hard work.

Okay. But then if your delivery time is only around about 2 months, then this should also be a positive for your price increases because of the gap between your price increases and realizing this, and the top line would be also roughly per month, at best, right? That's a pure math.

No, no. Your perception is exactly wrong because it's not in for ours. Not every order that we get now we have to deliver in 6 weeks. We have orders still in the books that were placed in June last year, but they were never meant to be delivered in 4 or 6 weeks, they wanted them to be placed and they placed and they are delivered maybe in June this year. In larger business in [indiscernible] or with key accounts, key accounts might order for 50 sites, 50 machines. Not all 50 sites we get all 50 machines at the same time. Neither them can handle it nor we can handle this. So in other words, we are sitting on a number of orders into the Q1 that are really back dating from 2021. As this backlog is so high at this point in time.

I see. So we still -- separate between the, let's say, frame contract business with key accounts and the, let's say, normal machine business when a customer comes in and says, I would like to buy a machine with delivery in, yes, 3 months or so.

It's also that we have a delivery that's reliable to the date requested by the customer. And that's what -- that's actually the main driver of our ambition, yes. It's not only just that we can deliver a certain volume. In the management of the supply chain, the date of the customer for requested delivery, that is the control point at which we look when we organize our supply chain. And here, if a customer comes and wants to have, let's say, a classic rollover, 8 weeks would be possible.

Yes. Exactly. And the constraint, Mr. Schramm, is at the end of the day, also the ability to install -- I mean we wouldn't have the ability to install at the same time all the machines from 1 key account. So they plan their installations when they have, let's say, replacement machines and we have to plan them and then we go. And that's why they place these orders sometimes early enough that they can -- depending on the season, most of them don't want to change the machine in the peak season because in the peak season, they don't want to have any disruption in business. So they're always in the off-season or the lesser season, they want them to be installed. However, it always has to be in line also we see available installation capacity. It's always a week's work to replace the machine out there in the wash bay with 2 guys. And there's also limit in what we can do. So that's why it's always by mutual agreement, we have to agree which machine is changed on. But in order to enable the standard process, they order bigger batches of machines, they tell us we want these machines in the locations. This is how it works.

All right. I understood. And then coming just back, if I took this correctly, in your outlook statement, you said you are calculating this, on average, 5% higher material cost for the current year. Was that correct? So that's the average of all your material supplies, right?

Yes. That's correct.

Which to me sounds relatively low number, to be quite open. If I look at the dramatic rise we see in steel price and related components -- so not sure how can you escape this and come out with a right moderate increase? What's your [ secret ] here?

We can't escape it and I also said that there are no further repercussions included or reflected from the prices from the war in the Ukraine. So what happens at the moment with steel, you're right. For example, the steel, that can have further implications. So that is not included in the guidance that is currently happening or in future.

And do you have still -- are you there are still some longer-term contracts in place? Or do you also rely on a lot of other companies on short-term procurement and you have to pay spot prices more or less?

Well, we have both. We also have a lot of long-term contracts. And with regards to steel, we rely at the moment on the long-term contracts. But as I said, at the moment, the situation sometimes it is deteriorating every day. So it's difficult to say. So our guidance is based on the status before any further heavy significant deterioration from the war in the Ukraine.

Mr. Schramm, your question would be what are the expected price increases by steel products. And this question is in the days, being quite difficult to explain. And you are mentioning of the contracts and spot markets. What we do is, if we have chances on the spot market, we take in stuff, but not because we need, but we want to plan ahead. So again, very proactively, we see what the spot market has to offer. And now we are talking about really steel on the meter or whatever that we need for our products. And even we have fixed contracts, we look at the spot market, but to, let's say, extend our range. But the questions you are asking is basically something, give me the -- do you -- what is the expected price increase? And when you ask currently on the steel market, you know this probably, then you don't even get a price quote. That's the current stuff. We know -- we have checked with our suppliers whether they take stuff out of Russia or Ukraine. But even if they take out some things have, let's say, all the material out of China, then of course, you have -- because of everybody switches to that supply chain, higher increases there. And therefore, this question is a valid question. But it's, at the moment, difficult to answer, and we work hard in this thing.

Yes. But then that was a misunderstanding. I'm not asking about what you expect future prices, I think it's just the status quo. I mean, on average, at present, the steel prices at the crunch time are 20%, 30% ahead of the average from last year. The same applies for electronics, the same applies for plastics and et cetera, et cetera. And so far, I'm a bit surprised that you come up with plus 5% on average.

That was...

The prices are not as expected. I mean, the expected effect is even not included that would come on top, of cost, yes. That's for size price.

I have one of the surprise, relates to the following. My number is for 2022, so you have to include another increase in 2021. We already incurred a significant price increase of 3%. So that together makes the 8%. Is it now a little bit clearer?

8% on steel price, yes.

Thanks.

8% to 9% together with the increases we already incurred in 2021. [indiscernible] around cost increases in 2022.

And we haven't received any further questions at this point. So I hand back to the speakers for closing remarks.

So ladies and gentlemen, thank you for attending the talk. Those of you who are attending our Investors Day, we would like to welcome you then. And for the rest, I hope to see and hear you for the presentation of Q1, bigger. Until then, stay well. Goodbye from Augsburg.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.