Andritz AG

VSE:ANDR

Good morning from ANDRITZ this morning, and welcome to our full year '24 earnings call with analysts and investors. I'm Matthias Pfeifenberger, the Head of Investor Relations. And I have a big pleasure to introduce our hosts today. It's our CEO, Dr. Joachim Schönbeck; our CFO, Mr. Nettesheim; and our new Executive Board member, Vanessa Hellwing. What is the agenda today? We'll run you through the full year results, including the divisions, then we'll switch over to outlook and medium-term targets, followed by Q&A. And before we start, I'd like to pass over to Vanessa Hellwing for introductory remarks. Vanessa, please.

Thank you, Matthias. Thanks for the intro and also a sincere thanks to Joachim and my dear Board colleagues for the great welcome at the Board of ANDRITZ. So maybe a few words from my side.

Good morning to all. My name is Vanessa Hellwing, and I'm part of the ANDRITZ team since January. I'm very excited to take over the new CFO role from April following a very smooth and professional handover from Norbert Nettesheim. I have already been in CFO positions since the age of 29, and have been working with companies like Siemens, ThyssenKrupp, and Viessmann Climate Solutions, which was recently sold to Carrier Global. I'm bringing along quite significant experience in the large cap sector.

Many fields of my professional expertise actually imply a broad overlap with ANDRITZ's focus areas, like plant engineering in general or large project business in specific, but also the focus on sustainable solutions, a strong service offering and also my favorite digitalization. In my previous roles, I was driving large restructuring programs and portfolio optimizations. I have special projects like shared service setups and an IPO preparation. Equipped with my experience, I'm looking very much forward to making a significant contribution and help promoting the ANDRITZ's success story to the next level.

While I'm today only enjoying the show, I will already meet analysts and investors at our next investor conferences scheduled in March and April. And hopefully catching up with many of you and well having good conversations. And with this, Joachim, the stage is yours.

Thank you very much. Good morning to everybody from my side. So we are very happy, Vanessa, to have you on Board. Even though we will miss Norbert, we, for sure, believe that you will help us to improve further. And I hope that the analysts will love it and the investors even more, because tomorrow is a better day than today is one of our DNAs. So that is a very good change. However, as you know, the changes in ANDRITZ are very much based on changes in continuity. This was when I took over from Wolfgang Leitner on the CEO, and this will be the same mode of operation we will have in this change on the CFO.

As we will be the last time in this round also from my side, a big thanks to Norbert for his good contribution and his good guidance of you to the greater good of ANDRITZ. I would say the times we are in currently cannot be more interesting to say the least. However, we see, I would say, some good improvements in Austria since the week. We even have a new government. And I think it's -- not everybody has heard it. They call themselves the government of economic reason. I would say that's at least a good start. And also Germany is on a good way to form a new government. So I would say that, that gives a good environment for what we share with you today.

So if we look to the ANDRITZ performance of Q4 2024 and the full year, I would say, we made a good end of the year, record order intake in December, very strong order intake in Q4. Overall, it brought us to a book-to-bill of 1, definitely driven in Q4 by Pulp & Paper and Hydropower. We see a good recovery in many of our markets across the industries, and we could see a continued growth in the Service business. Even in the, I would say, more, I would say, subdued market conditions of last year, Service grew quite strongly.

We had a slight decrease in revenue year-on-year, but I'm happy that we can report a stable EBITA margin, good improved mix from capital to service, solid project execution. We made additional provisions for capacity adjustments in Q4. Still the reported EBITA is stable. The operational EBITA could even improve. We have a stable net income with a record net income margin of 6%.

So if we put it in numbers for Q4, EUR 2.5 billion order intake, EUR 2.3 billion on revenue. The order backlog nicely increased from Q3. We are now almost at the same level we had been in Q4 '23, so EUR 9.7 billion. The comparable EBITA margin was 10.2% in the last quarter. It was, on the reported margin, 9.0%, EUR 206 million, resulting in a net income in the last quarter of EUR 154 million or 6.8%.

Looking to the full year, order intake and revenue both settling at EUR 8.3 billion. I would say, not too bad number for a difficult year we had. We have the comparable EBITA at EUR 743 million, 8.9%. The EBITA reported is EUR 713 million, it's 8.6%, exactly on the level of the previous year. That all results up in a net income of almost EUR 0.5 billion, EUR 497 million at 6% net income margin. The dividend per share, we are proposing to increase by EUR 0.10 per share to EUR 2.6 per share.

We made further way on our acquisition strategy, strengthening our digitalization and decarbonization parts of our strategy. We acquired -- summer last year, we acquired Procemex, the market leader of optical web inspection for the paper industry, extremely successful company, excellent fit, strengthens us in the digitalization and our efforts towards the autonomous mill. On the decarbonization, we invested in HydrogenPro that's our technology partner for the green hydrogen alkaline electrolyzers. And we acquired beginning of this year, in January, we acquired LDX Solutions that is a U.S.-based leading company for pollution control, especially in -- specialized in North America, sales approximately USD 100 million. I believe that it's the right time to enhance our business in the United States.

Order intake in detail. If we look Q4 full year, you could see that in Q4, the increase compared to last year was significant. Pulp & Paper, plus 25%; Metals, plus 6%; Hydropower, plus 54%. So it's really is significant. Only Environment & Energy dropped in Q4, but you might or might not remember, we had a very large order last year in the Q4 reported. So I would say, in total, it does well.

Looking for the full year, we can see strong growth in Hydropower, Environment & Energy. Definitely a reduced demand for Pulp & Paper and Metals. Yes. Maybe if you can see the development, if you look on the chart to the quarters that we had an increase in Q3 and even higher increase in Q4. So we believe there is definitely a change in the market doing.

On the revenue side, we saw a slight decline in '24. We had a solid growth in Service business. We had a very late, I would say, order intake pickup, which at the end did not convert into sales in '24. So that sales will come then in '25. In Pulp & Paper, we have the situation that the very large projects of the past years, they're approaching completion. And I would say, in Metals, the overall drop is not that significant, minus 2%.

Hydropower, very stable. But you could see we have an increase in Hydropower sales, that's 1% only. But if you see in the last quarter, the increase is 13%, and this basically reflects this business model of Hydro, execution times rather long. And in the first 6 to 9 months, rather moderate sales recognition because this is this period when we have the engineering trials, the mockup will be built. So we are confident that the sales will come. We do not see any delays in execution or any obstacles on our way. In Environment & Energy, we see the solid growth that we saw is basically across all industries that we are serving.

Having a more closer look to the Service business. We reached service revenue share an all-time high, 41%, never been there before. That is very good. And that is not only because the capital sales went down. But if we look to the absolute numbers, you can also see that we could increase nicely to EUR 3.4 billion service revenue. This will continue. The 8% is definitely what we would like to see further.

Capturing entire life cycle value is what our customers want. That's a clear part of our strategy. And we will go there with organic expansion and, of course, with M&A. With the large capital orders we have had over the past years, definitely provide an excellent basis to further increase our revenue shares.

You can see that we have a solid backlog, significant improvement, 4% from Q3 to Q4. Majority as usual in Pulp & Paper and Hydropower, and with the strong growth of Hydropower, that share is really significantly increasing. You could see, from previous year to this year, from 43% -- from 34% to 41%. So that is a significant increase, gives a good solid foundation for the sales recognition in this year.

Looking to the EBITA. The reported EBITA, as I already mentioned, dropped from EUR 742 million to EUR 730 million. EBITA margin is reported stable, 8.6%. You could see rather stable over the year. Interesting view definitely is on the comparable EBITA margin. I reported to you already in the last calls that we saw, in our industry, some, I would say, structural changes, which we do not believe will quickly recover. So we took the decision to go for capacity adjustments in certain areas, mainly in Europe; and within Europe, mainly in Germany. This has been accounted for. This is why the comparable margin is significantly higher. So we can report here 8.9%, EUR 743 million, which shows that we, on the operational side, made our homeworks and are on the right way to improve sustainably also our profitability.

On the ESG side, I would say we are well on track. Basically, the majority of our ESG targets for 2025, we have reached. We are lagging a bit behind on the share of green revenues. We stuck at the 44%. I believe it will be difficult to reach the 50% in '25. On the social goals, I would say we are on a good way. The governance is all green. We will define new ESG targets during the year. The greenhouse gas emission targets will be aligned with SBTi. We are in the process of getting their approval across. And we will -- I would say, within Q2 or Q3, we will inform you about the new targets.

So I hand over to Norbert to report in more detail about the financial performance.

Yes. Thank you, Joachim. And also from my side, good morning to all who are on the call today for the last time, but continuing as I did in the past. I will dig a little bit deeper into our group's financials, starting with the P&L and then going through cash flow, liquidity and some major KPIs, all related to the total group.

So starting with the P&L key figures about the EBITA. Joachim has already reported a very strong Q4 with EUR 206 million brought us to the EUR 713 million EBITA. This includes EUR 26 million additional nonrecurring or restructuring expenses, which we have accrued for in the Q4 to start some adjustments for capacity adjustments, especially in Metals and in some parts of Paper. This led then to the EUR 713 million.

And if you look to the left, with regular depreciation, we were able to get a 10.7% EBITDA number, which is a 20 basis points increase compared to previous year. And from EBITA to the right, you know the regular topics which we have in -- with regard to amortization, 51%, nothing special. Regular amortization, no special write-offs to do. Also have enough and well headroom in our impairment tests. Then with the EBIT of EUR 661.2 million (sic) [ EUR 661.9 million ], also a slight increase, 8% compared to 7.9% in the past.

And then comes, let's say, the first new in this slide, which you didn't see that way in past quarters. We report on a negative financial result. And this is simply a devaluation issue. You know that we had this cybersecurity joint venture, Otorio, which was a fully consolidated unit, because we had majority in the past. We took now additional investors in. And this led to the fact that we had to deconsolidate it, bringing our share a little bit below the 50%. And this deconsolidation led to, let's say, a slight devaluation -- not slight, led to a devaluation effect of EUR 23 million. It's simply a balance sheet devaluation of this matter. And this brought the financial results into the negative. The pure interest results is sufficiently positive with more than EUR 40 million in this number based on our favorable liquidity situation.

And with this negative financial result, we come to EUR 446.6 million (sic) [ EUR 646.5 million ] EBT and with EUR 150 million tax, which is a significant reduction in tax rate to 23.2% coming from the 26.7% in last year, driven by increase in deferred tax assets. We could manage to keep our net income somewhere in the range of EUR 500 million, as you were used to see it also in the former periods. 6.0% is a record high for ANDRITZ and is what we have announced in January last year in the Capital Markets Day as our net income target. So while on sales and on profits, we might have a little bit of a delay, with regard to the net income margin, we are already in the target dimensions. So that's it on the net income.

Having it not on the slide, but mentioning it quickly. Equity increased to 27.9%, EUR 2.2 billion. You might see when you look through our financial reports, which is a very favorable and a very sufficient equity portion, which later on is then also a basis combined with the cash to provide and pay sufficient and nice dividend also for '24.

So that's it on the P&L. When we now look into cash flow, you see here the classical bridge from the net income to the cash flow. And the nice thing is that we could turn in the Q4, this increase in net working capital. So the cash consumption due to increase of working capital in Q4 was stopped and it was even favorable. So EUR 25.9 million tailwind in cash flow in the Q4. But for the total year, negative effect of EUR 114 million by increase in working capital. As I explained several times, nothing serious or driven by this regular cycle of big projects, which are in the early stage cash positive and the late-stage cash negative. We have no more projects in the late stage and this led to the fact that working capital increased, nothing special, everything regular. And in total, we achieved EUR 636 million operating cash flow, which is, at least from our perspective, but you have to judge it finally, a very favorable number to generate more than EUR 600 million cash out of our EUR 8.3 billion revenues.

And we invested EUR 237 million in fixed assets and in M&A activities, and this led then to a free cash flow of EUR 399 million. Here, you see the backup for the cash flow, which I mentioned already, Q4 was EUR 233 million, very favorable operating cash flow. And this supports then the 3 years average to stay consistently above the EUR 550 million. And that means ANDRITZ is not only a profitable company, it's also a nicely cash-generating group.

And this then at the end, leads to the fact that the treasury box stays filled nicely. We paid back in the current year EUR 300 million of debt. And we did, as you know, the dividend payments in the last year. Had a share buyback of EUR 117 million. And besides all the usage of our liquidity, we kept the net liquidity still above EUR 900 million level, which gives us, as I said several times, sufficient room for strategic acquisitions in the next future.

And with all that said, that's a good result, well-dimensioned equity and a good cash basis, we were able to increase the dividend to EUR 2.6, and this is now a payout ratio of 51.8% and supporting the average payout ratio of above 50%, as we have announced it in the past.

So that's about the numbers. And I'd like to end with a quick view on the major KPIs. And as we said already in Q3, we will look a little bit more intensive on the return on the invested capital in the future. You see here the development over the years. We are now at a 22% level in last year, and current year level means more than 14% above weighted average cost of capital. So I would say, a good investment of money into ANDRITZ with a very high value creation on invested capital.

And here, the summary. You know the details of all the numbers which were mentioned already partly. Order intake was mentioned by Joachim, strong Q4, slight decrease in revenues. By the way, EUR 100 million of this decrease is from foreign exchange currency effects with a stronger euro compared to the real and the renminbi. So currency adjusted, it would be only a 3% decrease coming from this order backlog and order intake situation, as explained. But when you then look into the numbers, below all these relative profitability numbers, on a very good, partly increased level with the EUR 500 million. And as I said before, the strong cash flow leads then to the sufficient liquidity of EUR 900 million.

So that's it from me. It's also the last time I have the chance to speak to you. And the only thing I want to say is a big thank to all the people I spoke to in the last years. It was always perfect collaboration and a perfect communication. I wish you all the best, and I wish ANDRITZ and my colleagues also all the best for the future. Joachim?

Thank you, Norbert. So let's have a more close look to the business areas. Pulp & Paper, as we said, a difficult market in last year, significant recovery towards the end of the year, ended up in order intake in total minus 8%. Backlog also drove down revenue down by 13%. Profitability nicely up on a comparable EBITA margin from 10.5% to 11% and on the EBITA from 10.3% to 10.8%.

We had a good growth in the Service business that gives us good hope, good connection with the customers. Definitely excellent basis to grow that further. The increasing activities in Q4 led to 2 very important orders for us. We received orders for 2 complete pulp mills in China. That's, I would say, very good success. Also shows the appreciation of the market of our technology and the advantage the customers see to buy the complete pulp mill system from ANDRITZ.

As I said, the revenue decrease is due to the fact that the large pulp mill orders approaching the end. For sure, I would say, the record ramp-up of our latest pulp mill in Brazil for Suzano has set a new industry benchmark. Plate capacity of that asset was reached after 5 months of operation. Never seen that before. Proves the excellent cooperation we have with our customers, Suzano, but definitely also supported by our full automation and simulation package that could help the operators a lot during this ramp-up phase.

If we move to Metals, I would say 12 months ago, I also reported to you that the markets on the automotive side, on the steel side were, I would say, very subdued. This changed in the course of the year, which ended up that we could recover on the order intake in the Q4. So we had an increase of 6% compared to '23, even though over the full year, we are missing a gap of 15%. Revenue remained stable because we had a very good backup. I would say excellent cost control in this area. We did, I would say, decisive actions to reduce capacities in Germany. That's on the way.

On the costs, we have had to take the provisions needed to do that in Germany, which, I would say, affected the reported EBITA margin. But if we look to the comparable EBITA margin, you could see that we are improved from 5.1% to 5.5%. So I would say we're on a good way. With the cost reductions initiated coming into full swing this and the next year, we definitely are very positive that we will be in our target range very soon.

We had an excellent performance in the Service, a record high order intake and sales in our Service business, and we saw particularly strong growth in China. As you know, while the automotive industry in Europe is rather in a very difficult situation, a lot of business is going on in China, and we are very happy that we can be part of that good market development.

Hydropower is, I would say, fully exploiting the good the good development of the market. We had an extremely strong year in 2023. We made it an even better year in '24. Order intake in total EUR 2.2 billion, 7% up. Order backlog, even 16% up. As already said, the revenue only slight because the first year of a typical Hydro order only had very low sales recognition, but this will build up over the time.

The profitability is increasing. Also here, we need to follow the slow development of the new orders that we take. We have some, I would say, some old projects that need to be pushed out from our backlog in order to give the room for the margins to improve. I would say we are on a good way there. We won, I would say, a very sizable large-scale project in Q4 in the EMEA region. We hope that we can provide more details on that in the weeks to come.

Revenue, EBITA, profitability, I told you the -- so I would say, we are on a good way there. The market looks favorable, and we see a good trend. We see the mode of partnership between our customers and us in the hydropower sector moving from project to project, single transactions more into partnership mode. So we have signed basic, for example, with Hydro-Québec, a frame agreement for projects over the next 8 to 10 years to come, which gives us a better view on the future and also makes it more likely that we can work as partners to the benefit of the project. So I would say we will have a good outlook there.

Environment & Energy. Also definitely a highlight of the last year. Strong growth in order intake and in revenue, 8% in order intake, 15% in revenue. We could see a significant growth across all the industries we are serving. And we see a continuing demand in the products we are supplying there. Profitability is very high. Even though we have, I would say, rather high R&D costs at the moment, as you know, within Environment and Energy, a certain amount of our new products are included there, the green hydrogen, the carbon capture venture. So that usually takes a lot of development work. However, margins with 11.4% on comparable -- sorry, 11.1% comparable to 11.3% reported margins very high and supported, for sure, by a very good Service business, which we could also grow and see good potential to grow that further.

Coming to the future. Guidance for '25. We would like to give you a guidance for the revenue for the upcoming -- for this business year from EUR 8.0 billion to EUR 8.3 billion. And the comparable EBITA margin, we are forecasting from 8.6% to 9%. We want to point out specifically that we changed the guidance from reported margin to comparable, because I think it makes it more easy for everybody, also for you to take out these one-offs that not really -- that are not recurring effects and is basically maybe distracting sometimes the view on the actual figures. So we changed from reported to comparable EBITDA margin. We believe that within this revenue guidance, we are safe to land. We hope that we can narrow that down over the year we are talking to you.

On the 2027 targets, we would like to revise the midterm outlook a bit. We see a revenue target growth from EUR 9 billion to EUR 10 billion. We have it basically divided in 2 parts, what we call the base growth from the, let's say, increasing demand on the green products, normal smaller-sized M&As, the regular growth that we see in the Service business and also some expansion on the capital sales. And then we see, let's say, this extra effort, what we can, if there comes, for example, from these investment initiatives announced in some of our home markets for the green product, any large-scale orders for Hydro, for Pulp & Paper, our large-scale M&A would then lift us up to that.

Revenue level. On the EBITA, we have basically, more for your bookkeeping, we have adjusted these numbers now for the comparable EBITA margin and not to the reported EBITDA margin just to be clear where we are. Picture basically has not changed in Pulp & Paper and Environment & Energy. We are basically in the target range. In Hydropower and Metals, we are not there, but I would say within reach and in a good way, and we are optimistic if we stay course on our strategy, good execution, cost awareness, that we can reach the targets as we point out to you.

So if we summarize the new midterm targets '27, we see a revenue between EUR 9 billion and EUR 10 billion, comparable EBITA margin above 9%. And if the markets that we can only create to a very small amount, if the markets are there, we are very confident to reach that. So thank you very much for that. And I believe we are open for questions. I hand back to Matthias to guide us through.

Thank you, Dr. Schönbeck, and to our Executive Board members for the elaborations, and we'll start the Q&A session right away. [Operator Instructions] Thank you.

[Operator Instructions] And the first question comes from Akash Gupta from JPMorgan.

I have a few, and I'll ask one at a time. So my first one is on your change in guidance parameter. So you are now going to adjusted EBITA from reported EBITA, which I think may make sense given most of the companies guide on underlying numbers. But maybe a question, if you can tell us about the need for restructuring in the coming years, because you already took quite a large restructuring charge in 2024. So maybe if you can talk about what sort of restructuring we should expect in '25, '26, '27 to get to reported EBITA from adjusted EBITA that you're guiding? That's the first one.

So I would say, the capacity adjustments we had in mind have been initiated, have been announced. We are now in the process of executing that. So we will see in '25 that the majority of these capacities will be adjusted, and then we will see the full year P&L effect definitely later from '26 onwards. At the moment, there is nothing more that is under planning.

And then my second question is on your more than 9% margin target for 2027. So like once again, if we take 2024 revenues and take the midpoint of individual segment guidance, I mean, the midpoint shall apply -- would translate why you are still sticking with 9%. Why not raising margin target to above 9% to more like 10% level?

So we would be happy to report that your calculation is better than ours, and we can be at 10%. I would say -- we say greater than 9%. I would say, we see that not everything is in our hands. And we definitely see, at the moment, in a world where you're not very, very sure what will be the biggest news the next day, so I think we feel confident on the 9% to deliver on that. And you can be sure we will be happy to overachieve that.

And my last question is on any exposure to defense sector in any of your businesses because you have -- maybe from outside, you have a big Metal business. And if there are new investments in ammunition, is there any benefit that we might see to your Metal business or maybe any other business that may also benefit from higher defense spending in Europe?

Yes. We are not a defense contractor, but we know that some of our customers are supplying the defense sector. And for sure, shell lines for ammunition, they base on forging and metals forming. So for sure, our business is positively affected by that.

The next question comes from Sven Weier from UBS.

The first one is the usual question around the pulp mega mills. Maybe you can walk us through a little bit more detail on the activity level. I mean, we could see end of last year that Paracel is applying for the environmental permit. And I guess this usually takes 12 months. So would you say that you would see the mega mill activity picking up somewhere in the second half of this year? That's the first one.

So I would say, I cannot talk about individual customer projects, because they want certain confidentiality, which do not like to break. You can ask the public listed companies, you can ask in their calls. What we could see in the second half of last year, 3 complete pulp mills have been on the market. The one was in Brazil that we lost; 2 were in China, we won that. So apparently, there is a market. And we also see a pickup of project activity, as I said, across all industries, and that includes Pulp & Paper.

Fair enough. The second question was just on Metals. And I was just wondering on the auto exposure that you have. I mean, obviously, sentiment is weak. But would you say this business activity is at a trough and you see signs of improvement? Or is that too early to see any green shoots there?

We see improvements. We saw a very low investment activity in automotive and automotive related in the first half of last year. We see a pickup. We see Chinese carmakers moving to Europe, not only with their cars, but also with production assets. As I said, as we are a supplier to them in China, we see also that we can get a share of that once they're coming to Europe. I would say if the economy in total would increase in Europe, also the automotive industry will improve. And with the installed base that we have and the installed base our customers have, there's definitely a big opportunity also for our Service business, because if you do not go for new investments, then, of course, the repair and maintenance costs will increase. And with our, I would say, the good service coverage we have in Western Europe, we definitely can also take a share there.

And the last question I have is just coming back also to the previous question on the defense exposure. I mean, not sure if you can actually quantify it, whether we talk like 1% of your group sales or 5%. And the other question I have, obviously, when you look at the plans in Germany, not only a big defense stimulus, but also for the economy as a whole, right? I mean, infrastructure and possibly other things on climate transition. I mean, that all falls also in some of your neighborhoods in terms of customers. I mean, what's your sense that this could really have a broad positive effect also how your customers feel in Europe as a whole, that Germany is seen as a kind of an engine for the coming years, and that a lot of projects that have been on hold could start to move ahead on this? Or -- any thoughts on that would be appreciated.

So as a European citizen, I can only hope that Europe will again be the engine of Europe, because if the largest economy is struggling, I would say Europe in total is definitely in a difficult position. So I'm quite happy that we have now 2 parties in Germany that apparently are very constructively talking. And considering the high speed with which they made the decisions over the past 2 weeks tells us that they apparently picked up the sense of urgency we somehow were missing in the previous years. So I would say, I'm quite confident that investment decision in that climate will probably be made more rapidly in Germany. We have announced -- I think, 2, 3 days ago, we have announced another large order for a green hydrogen plant that is where we have the engineering order now, final investment decision pending. So I would say projects like that definitely will be supported by that, I would say, general sentiment.

And the defense exposure, would you say that's really like 1% or 2% of your...

Sorry, but I do not have a number to provide. But as I said, forging metal, metal forming, and heat treatment definitely are elements where we see there might be demand picking up.

The next question comes from Lars Vom-Cleff from Deutsche Bank.

Quickly, following Sven Weier, I would once again be interested in your view on the sentiment in the pulp and paper industry and your customers. I mean, you already said you're not commenting on individual customers. You expect more orders to come, all fine. But do you feel that the currently rising interest rates could postpone some of the orders you are hoping for? And also, I would be interested in your view that -- I mean, Suzano seems to have said lately that it expects capacity to exceed demand for pulp at least for the next 5 years given new capacity coming on stream in China. Is that something you're hearing as well? Or would you rather expect demand and, therefore, your order intake for large Pulp & Paper orders picking up again?

Okay. So I'm reading the same press releases as you do. And we have a strong belief, and that's also what we pick up from the industries we are delivering to. Pulp will be and will remain one of the strongest products to substitute plastics in many applications we see today. So I would say, it's not only the paper and board exposure, it's much more where pulp fibers will be needed. So our view on the long run is really more positive than assuming there will be an oversupply in 5 years.

If we look to the pulp prices, they don't give that sentiment. Interest rates, if they increase, that usually always hurts investment. Nobody will be surprised about that. But I would say the many more applications we see out of pulp give us a positive hope. On the paper side, we had seen many mill closures, especially in Europe, over the past years. They have bottomed out. So they are ramping up production again, which means they also earn money. And if they earn money, there is also, on their side, usually, there is a demand on modernization. So this is, I would say, why we are not looking very negatively to the markets right now and also not to Pulp & Paper.

And then maybe a quick follow-up question. I mean, modeling this year, you're guiding for flat group revenue at best, rather for a slight decline. I assume given the size of your Pulp & Paper business and order intake in 2024, the majority of that negative headwind for revenues we should see in the Pulp & Paper division, correct?

No, I would say, I cannot really -- I don't know. I have not calculated that number. I have to ask my numbers specialist.

You're right. You are right. There's a simple rule, order intake will determine sales, and this rule is also happening next year in our company.

The next question comes from Christoph Dolleschal from HSBC.

So my first question is again on the...

[Technical Difficulty]

You're breaking up. Mr. Dolleschal, your line is still open, but we cannot hear you right now.

Can you hear me, because on my end, it should be working quite fine.

If you can speak up a bit, we can...

Is it better now?

It's excellent.

So on the 2025 guidance, you talked about successful bolt-on M&A. So does the guidance of EUR 8 billion to EUR 8.3 billion actually include some M&A? Or is it organic?

Guidance includes what we know now. That's the LDX acquisition that I informed you about, we made in January. Anything else would be on top.

Okay. Then on the 2027 targets, so basically, you slightly revised your revenue targets. And could you also tell us where that is mainly coming from? Because originally, we talked about EUR 10 billion. Now we talk EUR 9 billion to EUR 10 billion. And the question is which segment that comes from mainly?

We did not attribute the discount to a specific segment or industry. I would say it is a more cautious approach to projections in the future, more taking into consideration, I would say, the very economic and political volatile environment we are currently in.

Okay. So all segments, I would say then. And then 2 little ones because we talked about defense. I also recall that you have some nuclear exposure. And I recall it is about 1%. Is that still the case?

Yes.

Okay. And last but not least, the evergreen Paracel. I mean, we've seen, let's say, last month, there was some chatter around that Paracel is seeking for other investors to probably even sell a majority stake in the business, which doesn't read that well if you're trying to sell 51% of the business because of, say, cost overhauls. I mean how is that currently panning out on your side? Are you still speaking to them? Are you still in the phase of thinking it's going to happen? Or is the likelihood declining from your end or in your view?

I cannot comment on that further. Yes. We are talking to all our customers, but we cannot -- as I said, we will not comment on individual orders.

Okay. But because it's such an important order, and I think the market has, at least from what I see, baked it into the numbers now, at least from my end, it sounds a bit more cautious than it probably did 3 months ago. Would you agree to that?

As I said, I cannot comment on that.

And the next question comes from Daniel Lion from Erste Group.

Yes. Actually, I would be interested in your capital structure and what you actually plan to do with or where your target is in terms of equity ratio. You're actually moving it up quarter-by-quarter more or less. Now at 27% already. Are you seeing any larger M&A transactions? Some were close to materialize? Or how do you expect actually to -- or where do you want to go or grow your equity base and your liquidity in the end?

Okay. Daniel, thanks for the question. This increase in equity is simply coming out of the game. We did a good result and this leads, at the end, to equity increase as long as you don't pay dividends or don't buy shares backs. The group is well financed. So we are not planning to take further debt on board as long as we don't have a huge investment. So all the bolt-ons we can do out of the cash flow, means we continue what we did. We continue to be committed to a stable and good dividend.

We are committed to organic growth as before. And we take what we do what we can with regard to M&A. And as long as we can finance it out of our current balance sheet, we do it from the current balance sheet. As for the case that we need debt for a large investment, we will take it. The banks are ready to support us. So all is open. Nothing new. Topic is very simply the opportunities which are available in the M&A area. We are happy to tackle everything what makes sense for us. So nothing new. We are well prepared.

So there are currently no more questions in the queue. So I would hand back to Matthias Pfeifenberger.

Thanks a lot for your interest and for your questions. I think this concludes the earnings call today, and I hand back to Dr. Schönbeck for concluding remarks.

So thank you very much for attending the call, and we hope that we can provide you more good news when we see next time in 2 months. Thank you very much.

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