WashTec AG (WSU) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the WashTec AG Annual Report 2023 Earnings Call. [Operator Instructions] The floor will be opened for questions following the presentation. Let me now turn the floor over to Andreas Pabst.

Hello, and welcome. I'm delighted to welcome you to today's annual press conference today with WashTec's CSO, Sebastian Kutz; and myself, Andreas Pabst, CFO. We look forward to presenting our current areas of focus, the business figures 2023, and we are happy to answer your questions. As you know, our previous CEO, Ralf Koeppe left the company by mutual agreement at the end of February. So before we dive into current areas of focus at WashTec, and the figures of 2023. A few words about Ralf Koeppe and about Michael Drolshagen, who we'll look forward to welcome as his successor. Ralf Koeppe was CTO from July 2019 and additional CEO from WashTec AG from January 2020. During his time as CEO, he led our company through many challenges for which all of us at WashTec are very grateful to him. Michael Drolshagen will now take over as CEO and CTO from May 1, 2024. He has extensive experience in the automotive industry, including as CEO of thyssenkrupp Presta and in various management positions at Porsche. With his expertise in the areas of aftermarket steering and production, he is predesigned for the new challenge. We are delighted that the Supervisory Board has found such an experienced and capable colleague for the management board in Michael Drolshagen. We'll have the opportunity to meet him in person in the next earnings call or at our Annual General Meeting on May 15. Now let's move on from changes of the team and take a look at our results and successes in 2023. First, a few selected highlights from the fiscal year 2023. As CFO, the first thing I look at, of course, is the figures here at the bottom right. And the figures are good. With revenue of around EUR 490 million, an EBIT margin of 8.6% and a free cash flow of EUR 46 million, we can be satisfied. We have met our guidance for 2023. At the same time for WashTec as for many other companies, the past reporting period once again presented a wide variety of challenges. Persistently, high inflation and the resulting of key interest rates hikes coupled with a generally high level of economic uncertainty put a significant break on consumption and investment. Tensions with China, the ongoing War in Ukraine and the Middle East conflict also had a noticeable impact on economic development. The German economy has cooled significantly since the end of last year. Contrary to the expectation last summer, a recovery failed to materialize in the second half of the year. This ongoing crisis moat has led to increased general economic uncertainty and also made our customers cautious about investing. WashTec responded to these successive crises in the fiscal year, among other things, by adjusting its strategy. In the summer together with the Supervisory Board, we defined and confirmed the following priorities for the years ahead. Total customer care. We continue to fulfill maximum customer benefit in everything we do. Based on our portfolio of superior equipment and biodegradable wash chemicals and on our advanced digital platform, we offer car wash operators and consumers the most profitable and most sustainable car wash. With the coordinated integrated system of carwash equipment, water treatment and chemicals, we enable our customers to achieve the best possible wash result. We see the integration of our entire product and service portfolio, equipment, service and chemicals embedded in digital solutions as a source of major growth potential. Of course, we continued the rapid development of our digital capabilities in 2023 with over 10,000 digitally connected systems and extensive digital service processes, we are making very good progress. In regional terms, we will primarily focus on our core regions of Europe and North America in order to better exploit the market potential availability there. We significantly increased profitability in North America in the reporting year. In terms of our revenue split, we exceeded the 40% mark of the aftersales business in 2023. Another major success for us in 2023 was in the area of sustainability. Back in 2020, WashTec set itself a target of a 30% reduction of scope 1 and scope 2 carbon emissions in the countries with production sites by 2025 relatively to 2019 baseline. We already met that target in the fiscal year 2023. In the period from 2019 to 2023, the WashTec group reduced carbon emissions by 2,750 tonnes CO2 equivalents or 32%. That is a great success. To keep up this good progress, we have appointed a sustainability officer in the first quarter of 2024. This ensures that all key environmental, social, and governance concerns converge at a central point and continue to be given maximum attention as well as giving us a clear conscience, sustainability is also a competitive advantage. In 2023, we launched a certification program for sustainable car wash. More on this now from Sebastian.

Thank you, Andreas. It's a pleasure to give you some updates on WashTec. Our primary corporate objective is to offer people who wash vehicles professionally the greatest possible benefit. In a nutshell, this means total customer care for us. Before I go into this in more detail, I would like to talk briefly about the basis for total customer care. In recent years, we have built up our digital platform, mywashtec.com. The whole thing is cloud-based and over 10,000 operator machines are now connected to our platform. These connected machines form the basis for our future digital business models. More on this in a moment. The whole thing is completed by our Wirksystem, which, in turn, forms the basis for the most sustainable carwash. We have our own certification so that our operators can communicate this to the outside world. Over 300 locations in Germany alone are now certified. One of the operators' basic needs is to increase the numbers of washes sold. In order for more washing to take place overall, it is necessary to bring supply and demand together. In addition to operators, we will also connect car manufacturers and other platforms to our digital platform, mywashtec.com. The big advantage is that every customer only needs to be connected once. Each connected car manufacturer and other platforms of us has direct access to all connected operator machines. We, therefore, will bring the car wash very efficiently into the car and into the respective apps of the various platforms. To ensure that we can do this efficiently, we have entered into partnerships with companies which support us with the integration. What do the digital services based on mywashtec.com look like now? Here, you can see 4 new business areas for WashTec. Flatrate, Total Care, Automatic Chemical Supply and Digital Service. Why am I talking about new business areas? Some of these services already exist in some markets today. However, stand-alone solutions. What is new is that we are now integrating these services into our platform and thus have completely different opportunities for monetization and are also expanding our range of services for all operators. Corresponding investments are planned for the current year. I would like to take a closer look at 2 of these services. The flooded solution, in particular, is an important component for operators as this solution ensures significantly more washes. We know from our experience in the Nordics where we have already tested different variants that it is possible to increase the number of washes by around 30% within a year. The crucial factor here is that carwash customers washed significantly more and are not just redistributed. The cake gets bigger as the market is growing. This solution, which we offer our operators, requires the operators to conclude a contract with us for the purchase of chemicals and technical service. We bundle chemicals and technical service with this digital solution. We also participate in every wash with a small fee. The increasing revenue on the operator side forms the basis for the next digital service, which I would like to briefly introduce here. Total Care is the further development of remote service and can be seen as the next step in digital service. The machine is monitored by a central remote help desk at WashTec. Machine operation can be maintained with the help of real-time video signals and other technical possibilities. The level of problem solving is extended and car wash customers who encounter a problem can place their request directly to the WashTec remote help desk employee via the cell phone. The purpose of a help desk is to ensure that the car wash customer gets helped quickly and professionally when something unexpected happens at a car wash. Very often, our car wash customer has to wait a long time to get help for many different reasons, but very often, because the staff are unable to leave the station or have no technical training. WashTec help desk provides the car wash customer with immediate assistance. WashTec also supports the unmanned operation of car washes with Total Care. The Total Care service is monetized by a monthly fixed fee. This service also requires the bundle of chemicals and service. As the combination of Flatrate and Total Care makes sense here, both are already provided. The new Digital Services, which are based on the Wirksystem and the mywashtec.com digital platform, offer our operators the greatest possible benefit. The Flatrate significantly increases turnover for the operators. With Total Care chemical supply and the Digital Service, we offer the answer to the staff shortage that our operators are increasingly confronted with. This is what we mean by total customer care. Our core business remains the sale of machines and washing chemicals as well as the supply of technical service. We are now adding new business areas to this, which will generate additional income and above all, contribute to operators' loyalty. I will now hand over back to my colleague, Andreas, who will continue with the topic of sustainability and present the financial figures and the outlook.

Thank you, Sebastian. Let me first say a little bit about sustainability at WashTec. Early on I mentioned major advantages in terms of sustainability at WashTec, to reiterate appointment of a sustainability officer, target CO2 reduction for 2025 already met in 2023. To tell about reporting. Our sustainability reporting is equally rigorous and transparent. We have published a voluntary sustainability report since 2021. And we will once again be publishing a sustainability report for the year 2023, probably in June. We recently went online with our sustainability website. Transparency is important to us in order to show the outside world, what we are doing and where we are focusing in terms of ESG. For this transparency in December 2023, UPD research singled us out for the ESG Transparency 2023 Award for our 2022 sustainability report. This award is presented for exemplary integration of advanced sustainability ideas into the business model. It recognizes us as a pioneer in the clear disclosure of sustainability initiatives in ESG reporting. Let me give some examples of what we have done in terms of sustainability in 2023 and what is on our list for 2024. In 2023, we converted almost all our buildings in Augsburg to district heating. For better heat distribution in our production facilities, we have switched the heating there to ready and ceiling panels. Waste heat from compressors is effectively used now. But we have not only invested in hardware but also in soft skills, training all employees on the new environmental policy. And we are not going to stop. In 2024, we are going to install the 213 kilowatts peak solar photovoltaic system. We are expanding our meeting -- metering infrastructure to ensure that we have the data we need to make further efficiency improvements. This includes areas such as optimizing our compressed air systems. As you can see, we are doing a lot of -- a lot to integrate sustainability in our day-to-day operations and our business models. This is because we firmly believe that sustainable business practices not only have a positive impact on our employees and the environment, but in the long-term also on our earnings. And that brings us to our figures for the fiscal year 2023. As I mentioned at the start, 2023 presented WashTec with a wide variety of challenges. And we have delivered on our promises. We met our guidance in all respects. WashTec closed the fiscal year with the highest ever revenue, EUR 490 million. This was admittedly only a small increase of 1.5%, but all the same. After all, 2022 was the strongest year in terms of revenue in WashTec's corporate history. Adjusted for exchange rate effects, revenue in the reporting year was up by 3.4% on prior year. The negative exchange rate effects related to movements in the Norwegian krone, the U.S. and the Australian dollar. The year-on-year revenue growth was mainly due to the very positive performance in chemical business, where new customers were acquired. At EUR 490 million, equipment and service revenue was at a level prior to the last year with EUR 420 million. Gross profit at EUR 137 million was 5.5% higher than the prior year figure. Gross profit thus increased at a higher rate than revenue. The gross profit margin improved from 26.8% in the prior year to 27.9%. This improvement was mainly due to the price increases implemented in response to material prices -- material price rises primarily in 2022. A favorable product mix also helped. Price increases on purchased parts and higher wage costs were partly offset by less expensive raw materials. Largely to an improvement in gross profit, EBIT rose by 10.3% to EUR 41.9 million. The EBIT margin was 8.6%, last year 7.9%. In its guidance, the company forecasted a significant increase in EBIT by more than 10%, which was achieved, considering that EBIT includes one-off expenses. In connection with the cost of optimization of the product generation -- of the new product generation and with the sale of our Chinese subsidiary, we can be quite satisfied with this outcome. Free cash flow increased significantly to EUR 46 million despite EUR 10 million for the acquisition of the site occupied by the American subsidiary. A notable factor comprised the measures initiated at the beginning of the year to reduce the amount of capital tied up in inventories. This means that the forecast for the significant increase in free cash flow by over 10% was very clearly exceeded. As usual, on this slide, we show you all of our key performance indicators for the entire fiscal year 2023 in 1 summary table. We have already gone over revenue, EBIT and free cash flow. Let me say a little bit about some of the other figures. The increase in net cash outflow from investing activities from EUR 6 million in 2022 to just under EUR 16 million is mainly due to the acquisition of the U.S. site, we just mentioned. ROCE came in to 21.5%, which is above the prior year's figure of 20.2%. The main reason for this was the significantly higher EBIT. The denominator capital employed increased by EUR 6 million or 3.3% year-on-year, mainly due to the rise in the noncurrent assets on the acquisition of the site occupied by the American subsidiary. The number of employees fell by 137 to 1,687 as of December 31, 2023. When comparing with the prior year, it should be noted that the December 31, 2022 figure included 50 employees of the subsidiary in China. Seven employees were added as of December 31, 2023, on the initial consolidation of the New Zealand subsidiary. The average number of employees at WashTec during the year was 1,708. Last year, it was 1,806. Let's now take a look at the fourth quarter. In the final quarter of the year, revenue fell by 7.6% to EUR 132 million. Revenue in Europe and North America, in particular, was down on the record prior year quarter mainly due to lower output volumes. EBIT in the fourth quarter at EUR 15 million was on the same level as in the prior year. Active cost management made it possible in this period to generate a double-digit EBIT margin of 11.3%, which is above prior year's 10.7%. Let's now take a brief look at the quarterly revenue breakdown. In this regard, WashTec has a characteristic long-term pattern where the individual quarters become increasingly stronger over the course of the year. Q4 better than Q3, Q3 better than Q2 and so on. This characteristic pattern was not visible in 2023. I think, partly due to the general economic uncertainty, making customers reluctant to invest. Despite this, WashTec has topped the prior year's quarterly revenue in each of the first 3 quarters. This was no longer the case in Q4, partly because Q4 2022 was an absolute record quarter, as we already mentioned. Looking at the quarterly split of the EBIT, we can once again see the characteristic seasonal pattern. In each and every quarter last year, WashTec increased the EBIT margin and outperformed the prior year quarter. Let's take a look at revenue by product. Equipment and Service revenue fell slightly by EUR1.5 million compared to the prior year mainly due to the general decline in demand in the market as a whole. Overall, the difficult economic environment and the resulting reluctance of customers to invest had a significant negative impact on the WashTec's group's business development. Both key account business and direct sales business were down on the prior year. Chemicals revenue grew very strongly. New customer wins made it possible to achieve significant revenue growth of 16% despite a mainly weather-related fall in car wash volumes. Moving on to the revenue by region. In Europe, revenue increased by 2% to EUR 379 million. As I have already mentioned, the equipment business was mainly affected by the general economic uncertainty and by changes in strategic orientation at major customers, such as total energies, selling all of its service station in Germany and the Netherlands to Couche-Tard. Renewal of the product portfolio involves start-up and ramp-up costs. Measures such as training for our service employees and design to cost issues were addressed in the fourth quarter and are having an impact in the new fiscal year. The good service business and above all, a very good chemical business with growth well into double-digit helps to compensate for these issues. In total, as we will see on the next slide, EBIT in Europe remained at the prior year's level of EUR 36 million. Revenue in North America was maintained at the same level in U.S. dollar as in the prior year. In euros, revenue was down slightly, but still top EUR 100 million for the second year in a row. Overall, in this region, too, the WashTec Group business in this region was affected by the generally slow demand. In total, the North American region accounts for 21% of group revenue. In the Asia Pacific region, we generated revenue of EUR 19 million, slightly above prior year figure of EUR 18 million. There are 2 things to note for this region. The first thing is that WashTec sold 90% of the shares in the Chinese subsidiary as part of a strategic realignment and will now continue to develop the Chinese market as a distributor market. The sale took place in December 2023. The second thing is that we took over the previously independent distributor in New Zealand, effective December 1, 2023. Of the revenue in this region EUR 6.4 million is attributable to China and EUR 0.3 million to New Zealand. This slide shows to EBIT by region. I've already spoken about Europe. Earnings in North America are particularly pleasing. EBIT there went up sharply by EUR 4.3 million to EUR 5.7 million, making it the reason for the overall EBIT increase. This is mainly due to the efficiency improvement projects launched successfully and implemented in the fiscal year 2023, particularly in the areas of supply chain and service. Here, you see the familiar EBIT bridge which illustrates the main earning drivers in 2023. It is plain to see that the improvement in the EBIT is mainly down to the increase in revenue and the better gross margin of 27.9%. I have already gone over the reason for this. If you look at the red items in the bridge, selling and administrative expenses stand out most. Selling expenses mainly increased due to freight costs by EUR 1 million, partly because of higher cost of freight forwarders and partly because of the higher proportion of business accounted by and for chemicals. Administrative expenses were around EUR 1.4 million higher in the reporting year than in the prior year. The increase was mainly due to the expenditure for cost optimization on the new product generation. Let's take a brief look at the following key figures. The reduction of the net operating working capital by EUR 22 million to EUR 84 million is mainly due to the lower level of trade receivables following the record revenue in the fourth quarter 2022. Inventories were also reduced by EUR 17 million compared to the prior year. The decrease is mainly due to the planned optimization as the considerable uncertainties on the procurement markets in recent years have now cleared. I already discussed fresh -- sorry, I already discussed free cash flow earlier. Net financial debt stood at EUR 42 million end of 2023. The decrease by EUR 3.3 million is mainly due to the increase in cash and the reduction in interest-bearing loans. Equity went down from EUR 88 to EUR 86 million. The equity ratio increased to 31.6% from 31.0% last year because of the lower balance sheet total compared to the prior year, primarily due to the reduction of the working capital. Orders received in the recording year were down year-on-year due to the drop in the demand in the market as a whole. Due to the lower level of orders received, the order backlog at the end of December '23 was down on the prior year, but it's still high overall compared to the long-term average. This is plain to see if we compare the order backlog figures over a long term, indexing 2017 as 100%. The relative order backlog at the end of 2023 was 173%, a good basis for the entire year in 2024. However, we also need to consider call-off orders, and hence, the timing of delivery and revenue recognition. We expect a slightly slow start in 2024 in this regard. Let's now turn to the guidance for 2024. As with any forecast, the outlook for 2024 is subject to uncertainties that could have a significant effect on the planned development of the key performance indicators. This may result, for example, from a possible escalation of the conflict in Ukraine and the Middle East, a significantly deterioration of economic conditions in important sales markets or additional burdens from structural adjustments. In fiscal year 2024 and beyond the WashTec Group, we'll continue to pursue its strategy of profitable largely organic growth. The focus is on maximum possible benefit to people who wash cars professionally. To strengthen its market and technology leadership in car wash, the company will step up investments in products and digitalization in the short term and develop new business model as described by Sebastian. The aim of the entire WashTec team is to continuously improve operating performance. The focus for 2024 will be on further optimizing existing processes and products and on investing in the development of digital solution and products. We see the integration of our entire products and service portfolio, equipment, service and chemicals, embedded in digital solutions as a source of major growth potential. In regional terms, we will focus on our core regions of Europe and North America in order to better exploit the market potential available there. To accelerate this process, the company will incur additional expenditures, the low-single-digit million range in 2024. For fiscal year 2024, WashTec expects group revenue on similar level to the prior year, with an increase in absolute EBIT in the mid-single-digit percentage range. We also expect net operating working capital to further normalize particularly with regard to trade receivables, payables and inventories. As a result, we expect a free cash flow of EUR 30 million to EUR 40 million. WashTec aims to employ the capital available to it profitably and efficiently. ROCE is our central measure of capital efficiency. In the medium term, the WashTec Group aims for ROCE of 25%. For the coming year, the company expect ROCE to remain at the prior year level, plus/minus 1%. But please, let me reiterate that all of these figures reflect our expectations based on current economic environment and do not take into account any major unheavals of any kind. This brings me to the end of my part. On the last slide of our published presentation, you will find the financial calendar for 2024. Thank you for your interest. Sebastian and I will now be happy to answer any of your questions. So now I hand back to the operator.

[Operator Instructions]. And the first question comes from Alexander Galitsa, HAIB.

Could you maybe first quantify the mentioned one-offs related to China and also the optimization of the product portfolio. That would be the first one. And the second question I have is with regards to the current trading. If you are able to see any revival from the key accounts that may be visible in your order funnel conversion. And maybe I'll squeeze a third question, which is related also to the sort of our overall demand situation. Wondering if there is any way for you to give us a sense as to what is the magnitude of the presumed pent-up demand in the industry from your key accounts considering the, yes, hold back on the investments over the last couple of years?

So maybe, Sebastian, I start with the question regarding the one-off for China and for our D2C design to cost measures. So the answer is that the amount is between EUR 1 million and EUR 2 million in that respect. And then you had the question about the current trading about key account, I guess it's a typical sales question.

Yes. Thank you, Andreas. Yes, so it's a little bit different when you compare the different key accounts. There are bigger companies, especially based in Germany who ordered a lot compared to last year. There is a bigger key account, Andreas mentioned him during this presentation, it's Circle K, though they're operating all over the world. So here, we see that they slowed down a little bit. But the reason is that the fiscal year is a little bit different. They are starting business from May until end of June. And in Europe, we see that this kind of consolidation because they bought the total network in Germany, Netherlands and Belgium. So I would say that 70% to 80% of our key accounts ordered on a bigger level, not all of the orders we have yet in SAP. Some of the orders we have already signed agreements, but we have a certain conversion rate because we need to check all the sites, make proper offers for every site. And then it needs to be converted into SAP. That means from the moment where we get the order, let's call it like that and it's signed, it's sometimes a process which takes up to 6 weeks until we have it in SAP, yes? So that's a little bit about the key accounts.

Does that answer your question, Alexander?

Yes, it does. Thank you.

The next question comes from Stefan Augustin, Warburg Research.

Yes, sorry. So the first one is actually on the Flatrate solution and the Total Care you mentioned with the bundling. So is this, let's say, by now already everywhere available in Europe? Or is the amount of investments you have mentioned for '24 a part to roll these 2 solutions out? That would be my first question.

Yes. So then I will start. So basically, both solutions are available as so-called stand-alone. We have both solutions already in place, especially in the Nordic countries, but we decided instead of keeping rolling out these solutions to further countries, we stopped it a little bit and said, let's first integrate it into our platform because then we have total different possibilities of how to say, monetization and adding extra benefits. So therefore, they are available, but we are not rolling them out now to other countries because we need to integrate and the integration, yes, will keep us busy during this year. And of course, we also need to invest time and money into a kind of transformation of the organization, because selling digital service, it's slightly different than selling all the equipment. Does this answer your question?

Yes, this answered my question with that respect. The second one is if we, yes.

Maybe I can put a little bit clearance on. I guess we used the word invest. It's not invest in terms of CapEx. It's more invest in terms of OpEx, meaning schooling our service technicians, schooling our salespeople that we can really offer this one. Just for clearance, it's not CapEx, it's OpEx.

Okay. Maybe here a second question. So if this would be then readily available and you would roll it out further in Europe in 2025. Is the -- let's say, can you fully take advantage on the production setup of the chemical side when you have this higher demand already? Or do you need to do investments here as well?

So in general, so if you speak about the production capacity, which we can do in Graben now, which is our chemical plant there, then we think the next 2 or 3 years, we can increase our team there. But afterwards, if the business is ramping up as we expect them, we also need to invest in our production facility in Graben now. And then the second part is more about bundling. Sebastian, do you want to take this one?

Yes, of course, yes. So both services actually like Total Care and Flatrate requires the bundle of chemicals and service. And everything is paid per use. The idea is to start implementing these services amongst our bigger key account customers. And most of the key account customers have a service contract with us already. But we see a big uplift in terms of chemicals because not all key account customers are using our chemicals. But this will be the mandatory if they want to have -- if they want to have -- if they want to buy these kind of services or they want to implement these services.

Fully understood. And as a last one here, maybe have you made a decision already about the chemicals business in the U.S. And if you want to ramp up production there?

I'll take this one. So to answer, not yet. We have not yet taken. So we are, right now, taking a closer look on the market, on the possibilities. And we hired last year one dedicated person for that job. And he is now traveling the U.S. quite frequently. And we are close to finalize the, let's call it, the list analysis phase. And then we will take a closer look what is more beneficial for us, either buying someone building something up or going on cooperation. So that decision has not yet been taken. But we are working on it.

And I would like to add here that the question appears regularly I would say, what is our chemistry business and our chemistry strategy in U.S. and -- it is, for me, it's important to point out that we are really working on a day-by-day business on the strategy. And when, let's say, half a year ago, we had a huge variety of possibilities, which we could take in, in North America, we have now only left 3 or 4, which we are really considering much closer. So it's really a progress forward, but we are not at a stage currently to say, okay, we take option 1 or option 2.

Fully understood. If I look at the number of employees that looks a bit more than the normal fluctuation. So are there any severance payments now that had been made in '23?

There are some several payments but not dedicated to a huge number of people. So we really used the natural fluctuation to reduce our staff. And a part of it is also done here in North America, where you do not have to pay huge severance payments.

And the next question comes from Lukas Spang, Tigris Capital.

My first question is you mentioned price increases in your presentation. Can you quantify that price increases?

You mean on our revenue side or on the purchasing side? No matter what, the revenue side? So -- but what we have done, it was explaining coming from 2022 to 2023. So in 2022, we really saw a lot of price increase on the purchasing side. And we answered those price increases with several own price increases, which we did in 2022, several steps, but also some in 2023. And for 2024, we do not see really significant price increases. Currently, we are discussing about a smaller one in April, first of April.

Yes. But in a small 1-digit percentage at the bottom range, yes.

But it turns out that the prices now in 2024 are on both sides more stable than they have been in 2022 and 2023.

But if you would quantify the price effect in 2023, which number would you give us?

Machine or chemicals or both?

Machine, machine, I think 15%?

That is also the figure I have in mind. So if you speak about machines, so in average, it's around about 10%, 10% to 15%, something like that.

And for services, no price increases?

Yes. Of course, we also adapted the prices per hour and adapted the contract as well in a comparable range as the machines. We also increased in chemicals.

So it's always something between 10% and 20%, but more 10% to 15%.

And then if I got it right, you'll have this long-term ambition on long-term targets for 2030 with EUR 800 million revenue and 15% margin. So 2024 will be the second year in a row with more or less no relevant revenue growth and also in terms of EBIT margin, you still have a long way to go. Can you give a little bit more light in terms of how you want to reach these targets? And what's the path going forward after 2024 to reach that?

So that's the clear target picture we still have. But what we are also doing currently is we really focus on the next year and the midterm range, and that is why we focus currently or why we focus in 2024 doing some investment to reach all this additional business cases Sebastian mentioned. And if we do that, then we see that the increase in terms of revenue, but much more in terms of EBIT will come significantly in the next year. So it's like investing in 2024 and then harvesting in '25, '26 and coming to these figures in 2030, which we have already mentioned, I guess, last year, the year before. But I see what you're saying, it looks like, okay 2024 is again one year of...

Transition.

Where the growth rates are not very likely to show that we reach the target 2030. But we are -- but we are clear that we invest here and then it will accelerate.

So the next question is a follow-up coming from Alexander Galitsa.

Yes. I'd like to ask a question on the U.S. 2023, you reached 6% almost EBIT margin. Just wondering in terms of setup you currently have there, should we think about the progression that you will be able to reap operating leverage down the road as the top line growth? Or do we need to count with higher incremental costs also for sort of further improvements in the setup? Or you're happy with where you are now?

The last sentence of your question was are we happy with 5% or 6% EBIT margin in U.S. No, we are not because we want to increase the U.S. to a level which we have in Europe on the mid and long term. If we look in 2024, it's -- I would say it's a top line game. You know that in North America, we are much more dependent on some key accounts than we are in Europe. And Sebastian already mentioned about this one a little bit. In terms of costs, I think we've really done our work in 2023, and that is what you can see in the improvement of the EBIT margin coming from 1-point something in 2022 to 5-point something in 2023. So there will be -- I hope there is, and I'm sure there will be some stability in the cost structure in North America. And now it becomes a volume gain on the top line. And if we execute our chemistry topics and the further development in service, then also there will be even more EBIT margin.

Understood. And then maybe a follow-up. With regards to the top line, where do you see more potential for growth? Is it the rollover business or really ramping up volumes of tunnel -- tunnel systems?

Yes, a very good question. So basically, of course, the biggest volume, and this is where we will focus on is on tunnel. Especially on the fast-growing segment of the short tunnels. And here, we have some advantages because these are mainly our customers who would like to build their short tunnels and basically, they do it on, how to say, on existing sites. And this is where we will support them because we have the contracts, we are able to provide the service, the local, let's say, tunnel-focused manufacturers, they're not good in providing service. They are good in enabling other people with their academies to provide service. But this mineral oil companies, the oil majors, they don't have own people and they don't want to hire own people. So here, we have some advantages. And therefore, we will focus on the tunnel segment.

Do you mind to explain a little bit what a short tunnel is?

Yes. So if you want to, how to say, invest in a normal tunnel, you normally -- you need to look for a proper ground. You need to get a building commission, and it's a process, let's say, between 1 to 2 years which takes quite long. And there is a kind of trend which we see coming up is that you convert an existing in-bay where you normally have a rollover into our short tunnel. That means you build up very fast short tunnel in the in-bay and that's a process we are talking about 2 months more or less. And very often, you don't need big constructions and no commissions. And of course, you can't wash, let's say, 100,000 cars a year but you can do 30,000 to 40,000. And if you convert a certain amount of in-bays into short tunnels, then yes, it's a very solid business case. And this is what we see what is now ongoing with our customers.

Interesting. Just 1 follow-up to that. Would you say that your participation on this trend is rather high because you are obviously more exposed to the rollover segment. Could it -- you don't see it as a threat that simply more and more of your rollovers will get replaced with tunnels where you're not participating to the same sort of market share?

So that means, of course, we need to follow the demand of the customer. So if the customer would like to have a rollover, we can provide a rollover. If the customer rather would like to have a tunnel, then of course, we can also provide a tunnel. That means, yes, as we always say, the bait must taste the fish and not the fishermen. So at the end, we are a full scope provider. And of course, our main business as in the U.S. is the rollover. But yes, somehow we're also the founder of the tunnel. So we have it in our segment, and we have very, very good solutions. And we are also focusing on topics like sustainability and other aspects, which is quite important for companies who operate all over the world, not only in the U.S. And the local suppliers are not very focused on that topic, for example. Therefore, I think it's -- yes, we have a good setup to fulfill the needs of these customers.

Understood. And then very last question for me is with regards to chemicals and the prospects in this business. Looking into growth, you see it more coming from your existing customers that you sort of switch on to the bundling model or really acquiring completely new customers as was the case in 2023?

In Europe or in U.S.?

I guess you could touch on both. I mean Europe mostly, yes.

Yes, of course. The bundlings will help us, of course, to sell more with our existing customers, mainly the key accounts, as I mentioned before, not all key accounts have 100% our chemicals. So that means here it will help. And the bundlings, of course, will also help us to onboard new customers. But basically, we will focus, let's say, on sites, which have our units. And there is still a lot of potential to gain in Europe. And in the U.S., of course, we need how to say, right now, we have a partner and the margins are not very high because we are not producing, we are just buying. And the distribution in the U.S. is totally different and more cost-effective. So that means, yes, we spend a lot of money on the distribution. So we have first to solve the, how to say, the topic with production, either producing by ourselves or shipping. But I think shipping is not the best alternative, shipping all the water over the ocean. So that means the main focus will be in Europe at least for '24.

At the moment, there seem to be no further questions. [Operator Instructions] As there are no further questions from the audience, I would like to hand the floor back over to Mr. Pabst for closing remarks.

Thank you for all of you joining this call for the questions. We are happy to answer your questions. If there are any further questions, just drop us a mail, call us. Thank you for joining the call. Have a good evening. Good day.

Thank you all, bye.