Cewe Stiftung & Co KGaA

XETRA:CWC

Earnings Call Transcript 2018-Q2

[Olaf Holzkamper]

Thank you very much, and welcome, everybody, to today's Q2 conf call on our quarterly results. We are looking outside here at great weather. And the weather is not always only a nice small talk starter for any conversation, any presentation, but the weather had some importance for us, and quite substantial importance for us as a business driver, as you're all aware of. So I'm sure that Christian Friege, in his part of explaining the overall situation and the P&L overall, will certainly refer to this in more detail. The agenda overall is that Christian is going to lead through the details of the P&L and the overall situation of the company. After that, I'm going to run through the financial topics as commercial -- as the P&L, as the balance sheet, cash flow and the return on capital. Christian is going to finalize with the outlook. And we are then happy to pick up your questions. So I would say, Christian, the stage is yours and more other than weather.

[Christian Friege, Chairman of Management Board & CEO]

Thank you very much, Olaf, and a warm welcome to all of you. Good morning. I hope you all had some rest during the summer heat and took a week or 2 or maybe even 3 of vacation. And if not, then that is hopefully still ahead of you. We are looking at our results for the first 2 quarters of the year. In fact, the question that is at hand today is where do we stand halfway through 2018. And the situation is a good situation. We have sales that are up in the second quarter, plus 6.8%; in the first half of the year, plus 8.5%. We have positive sales indicators from our main businesses. The CEWE PHOTOBOOK is actually growing and the first half of the year by 3.9%. We see in the second quarter an organic growth in our commercial online printing division. And overall, in the second quarter, we have seen a growth of 23.8%. That includes the growth from LASERLINE. All of these things I will explain to you in more detail, together with Olaf Holzkamper, as well as our EBIT line. The CEWE Group EBIT for the period is at the same level as in the previous year were we to take out the effects of Cheerz and LASERLINE, the 2 acquisitions that we added to the portfolio at the beginning of this year. And these losses at Cheerz is to build up the business, and the integration costs for LASERLINE were planned so that the reported group EBIT, which is reduced by EUR 2.9 million compared to the previous year, the first half of our business year, to minus EUR 3.4 million, is within our planned and expected range. So overall, and this is the conclusion of our first half of the year for the board of this company, we have clearly every reason to confirm the annual targets for 2018 and EBIT in the range of EUR 48 million to EUR 54 million, as expected.Now without much further ado, let us look into the businesses in more detail. First, if we go into the photofinishing category. We are delighted that we were able to win the TIPA World Award as the best photo print service worldwide, and we were awarded this prestigious award by the Technical Image Press Association for the refinement of our CEWE PHOTOBOOK covers. And this is indeed a feature that I have not seen elsewhere in the market, and it took us a good portion of time, more than 2 years, in fact, to get the machinery and the programs and processes so well set up that we can actually offer the refinement of titles and small icons as well as the refinement of the whole cover in a wooded enhancement or something like that. These are features that underline the premiumness of our brand. These are features that are very difficult to copy for other photofinishers, and this is something that I have to say we are as proud as we are of the TIPA award. I would hope that you all got an invitation to visit us at Photokina. And if not, I'm sure that Axel Weber can arrange something for you because we'll be delighted to show you and for you to touch also the range of products that we have on offer, the refinement of our cover but also the product innovations that we are about to show at the Photokina and that we are convinced will support our business in the fourth quarter and in the years to come. So a warm invitation to all of you to come to see us at Photokina. It is indeed the show for us to showcase what we can do in photofinishing.If we were to look into more details into the numbers, you can see that in Q2, the photos from films expectedly declined by about EUR 1 million. The digital photos expectedly increased. And overall, with a total increase by 1.9%, we are well above the target for 2018.If we were to look at the first half of the year, same picture, a decline in the photo from films; obviously, digital photos grow. Photos in total plus 4.2%, much above the target for 2018. And if we were to look at the CEWE PHOTOBOOK, again, with a growth in the first half of the year by plus 3.9%, we are well above the target for the first half of the year that we set ourselves. Now if you look to the left of that slide, you can see that in Q2, there is a marginal movement only. And we can see here, for the first time in this presentation, the seasonal shift, the extremely hot weather conditions and also the sun. The sun is our friend because if it's sunny and great weather outside, people take photos. In that way, it is our friend. But unfortunately, when people take photos, they are not ordering them at the same time. So they need a little bit of rain now to order all the great CEWE PHOTOBOOKS from the photos that they take when the sun is shining. There is also an event like the football World Cup. In Germany, we have not spent too much time on that. But please don't forget we are a European business and we're also heavily engaged in France, for example. And I can tell you from a personal holiday experience that the French people were very much into the World Cup this year. So also, the football World Cup had an influence on our Q2 volumes. If we look at the value of photos in Q2, you can see in the middle column value per photo goes up by 2.5%, and it is at the highest it's ever been in Q2. The same obviously with the turnover. And if we look at the first half of the year, same picture. For the first time, the value per photo is above EUR 0.20. And it is, again, as in the past years, climbing up consistently. I have to tell you that the photofinishing business is and will remain a -- the backbone of our company and is still going strong, as you can see also on this slide, where we look at the quarterly results and compare them with the expectations. In both Q1 and in Q2, we've actually been able to meet what we had planned to do in these quarters.If we compare turnover and EBIT, the aforementioned seasonal shift and the weather conditions, the football World Cup and also the fact, by the way, that Easter was in the first quarter this year and increased sales of the seasonal business around Easter and was in the second quarter last year, so we are comparing ourselves against a quarter with Easter that didn't have Easter this year. So -- but still, we see turnover increase of 4.5%. We see a slight decline in profitability that can absolutely be explained by the Cheerz acquisition. And so going through the first half of the year, we have photofinishing that grows organically and through the Cheerz acquisition as far as the sales are concerned. And if we take out the Cheerz EBIT, we also would see stronger EBIT than in the previous first half of the year. So in my mind, photofinishing is doing for CEWE what it is supposed to do.On the next slide, you can see that our seasonal shift is actually ongoing, and we probably underestimated the seasonality of our business and the shift in seasonality. So if you look at the Q1, we have actually achieved an EBIT well above our target and we've fallen short of the target in Q2 for the reasons that I explained before. But if you were to take these 2 quarters together, we are again with an expectation of a profitability around EUR 200,000 or EUR 300,000, with EUR 300,000 well within that range.So far for photofinishing, commercial online print, you're all aware of the fact that we have added LASERLINE to the fold at the beginning of this year, and we see LASERLINE contributing to our business in the medium to short term. We are currently very busy integrating LASERLINE into our commercial online printing business. We'll relaunch the website within the next few weeks. We've integrated IT functionality. Obviously, we've appointed a new MD for the LASERLINE business, who actually comes from the marketing and sales side of our business. And we are combining, most of all, the 2 printing plants that we've acquired into 1 and also shifting product from Berlin to Saxoprint. And all these things, obviously, cost a little bit of money that we call integration cost, which was, in the second quarter, EUR 300,000. On the next -- on this slide that is currently in front of you, you can see a few things that are interesting to look at and to evaluate our commercial online print business. First of all, the sales and the turnover grew by 23.8%. That is the addition of laser print plus a good showing of our existing commercial online print division in terms of the growth. You can see that the profitability is below that of the same quarter last year, and we have still the same struggles that we are fighting, the Brexit and the price competition in Germany, et cetera, et cetera, but there's obviously now a EUR 300,000 impact of the LASERLINE integration, plus increases of material cost that you've all read in the papers about. There is a struggle in the courier industry, DHL, Hermes, et cetera, et cetera, for prices, delivery times, et cetera, that also obviously impacts a business like our commercial online print. You've read about paper and other material cost increases that are coming through, and we are working on compensation. But with the challenges that I pointed out, Brexit and price competition in Germany, that is not as easy as I wish it would be. But one thing can actually be taken into account here, that the increase in revenue levels offers a stronger basis to improve our profit situation over time. For the first half, you see that we almost reached EUR 50 million in turnover, and the decline in profitability is being explained for Q2 and equally applies to the first half of the year. In our retail business, you all know that we are running 146 retail stores across Norway, Sweden, Poland, Czech Republic, Slovakia and also 2 retail stores here in Oldenburg, the roots of our business, the -- a company called Wöltje here in Oldenburg. And we've actually -- we rang up EUR 53 million in revenues in 2017. What are we doing here? We are continuing with the strategy that we pointed out to you before, which is we wanted to utilize this network of stores in those countries to further showcase the CEWE brand, to focus the stores more on the photofinishing end our business. And you remember that the photofinishing turnover is not reported under retail. It's added to the photofinishing division. So what you see in terms of revenue here is solely what we call the hardware business. We've done some adjustments in pricing. We are not running with every and each loss-making offer that is out in the market. And we are urging the hardware producers to allow for us very much, and that's actually sustainable to the business.We've started to rebrand stores. You've just seen a store in Warsaw of our FOTOJOKER chain. This store that's currently on display is in Stockholm. It's solely focused on photofinishing, a strongly branded CEWE, and it does help us to establish the CEWE brand better also in Sweden.If we look at the numbers for the second quarter, there is not very much to report. There is a decline in turnover; that is expected given the change in the structure of the photo hardware market. But the second quarter is not an important quarter in this business. At the end of the year, in Q4 and the 24th of December, we will actually know about the results of this division, and I'm not worried about those.The decline in profitability is easily explained with a slightly higher value adjustment on inventories, and that actually explains most of the difference between previous year and this year. Again, this is a shift in quarters that is not anything that we all need to worry about. In the other division, you know that everything else is lumped together, corporate cost structure, cost/profit from real estate and also our futalis business. Again, not very much to report. All the sales come from futalis, and that's about that. And having looked at all of these details, the overall picture for the CEWE Group is that we rang up an increase revenues of 6.8% in the second quarter, which leads to the aforementioned 8.5% increase in sales in the first half of the year, which, if we were to look at the foreign exchange effects, would have been even almost 9%. Some of the European currencies outside of the euro actually lost a little in their value and led to this decline. In the EBIT, all of what I explained adds up to a minus 3.9% in the second quarter. Again, the difference between Q2 in 2017 and in 2018 is largely explained by our 2 acquisitions of Cheerz and LASERLINE. And for both acquisitions, I can report that they are on track as far as our expectations are concerned. And so the overall loss of minus EUR 3.4 million in the first half of the year is where it was expected to be and where it needs to be in order to total our overall ambition for the year.And that leads to me to hand over to Olaf Holzkamper, who will dive into a little bit more detail into the structure of our P&L and of our balance sheet.

[Olaf Holzkamper]

Thank you very much. And P&L and balance sheets are the right numbers and the right words and in that order. So why don't we start with the P&L structure. We looked at the revenue development already. We have a plus EUR 7.9 million additional revenue in Q2. So that is the movement we have just seen, and you've seen the drivers of that. The next rows in our P&L structure are not really of any big difference. Let's perhaps look at the other operating income here, that's a -- that's various items as always. We do want to pick out 2 there: it's a VAT refund for previous assessments periods we had there. Because after the checks already finalized, was signed last year, we could finally hand in all those details, and we have this nice refund there. And the same as rental income from the Saxopark acquisition, the part of Saxopark that's not used by Saxoprint, which is let out, and we have a rental income there. So that's something that has to increase slightly there, among other things, as always. So that is the plus 2.1% in other operating income. If we then look at the operational lines, materials, personnel, other operating expenses and depreciation, amortization, those 4 lines are obviously, like the revenue, also very much influenced by the 2 acquisitions that we have seen because last year is obviously without those 2, Cheerz and LASERLINE, and the Q2 of this year is including those 2. So that is adding those numbers that you see on the right-hand side in absolute terms. So we have the minus EUR 2.1 million more of cost of materials and so on. That is -- these 2 companies are adding to those cost lines there. And in all those cases, they are also contributing to the fact that we are increasing those cost items in terms of percent of revenues. So for cost of materials, for instance, you do see the increase from 31.9% to 32.1% within this year for the Q2. And that is driven -- those increases in percent of revenue terms are obviously driven by the fact that those companies are adding their cost level and are not quite adding the revenue level on the same level as the typical old CEWE business would do, in the LASERLINE case, due to all the integration and change costs that we have right now and the change situation; and in the Cheerz case, due to the growth phase that we have there. So we are seeing more and more revenue there, but obviously, for the time being, the cost level is not quite up to where we would like to have it in the long term -- or the revenue level is not quite up there. So in that case, in both -- in all those 4 cost lines, you do see the increase in absolute terms and in relative terms in percent of revenue here. Having said that, a bit more details. Perhaps, we don't have to add anything to the material costs. If we look at the personnel expenses, there is also additional recruitments in there for our central functions. You know that R&D is of tremendous importance for us to have all the software ready that we need for Christmas and so on, so we keep adding people there in terms of personnel. And that is driving the minus EUR 4.5 million additional personnel cost.In terms of other operating expenses, that is mainly driven by acquisition of Cheerz and LASERLINE, quite frankly. In our core business we had before already, those operating expenses has been even reduced slightly compared to the year before. And if we look at the EBITDA situation -- sorry, the amortization and depreciation situation, the same applies. The increase we have seen there is mostly due to Cheerz and LASERLINE. That leads us to an EBIT which is reduced by EUR 3 million. Then face value, as we see it here, in terms of difference to EBT, we have financial income. There's hardly any change in the expenses. In financial income, we have a slight change, which is not really financial asset. The one is a real booking terms, it's a decrease of value in a booked option in a fully consolidated business we have there in our business group. So it's really retail which is making up for half of that number of EUR 0.5 million. And the other half is some interest we have received from the VAT refunds -- driven by the VAT refunds we mentioned before. So it's not a big change, as Christian has mentioned. And it's very much driven by the acquisitions of Cheerz and LASERLINE that, as we talked before, as Christian has led through in segment by segment terms. If we leave the P&L and move over to the balance sheet, we leave the perspective of a quarterly review, but let's compare a 12-month perspective now, more long term, in terms of how the balance sheet developed here over 5 years. And especially, you can see that there is some movement from 2017, 30th of June until 2018, now the closing date. And that is driven also by those 2 acquisitions: Saxopark, which happened already in 2017; and LASERLINE and Cheerz, which happened in Q1 of 2018. So those things, 2 companies and the real estate, actually driving the balance sheet, driving the assets and driving the liabilities. If we look at the assets side, you see the overall balance sheet has been increased by EUR 82.8 million to EUR 391.6 million. So there's a bit more than EUR 80 million total increase, which is driven by the noncurrent assets, as you can see, which has increased by EUR 84.2 million to EUR 270 million here in this case. And this increase is again largely driven by the acquisitions of Cheerz and LASERLINE, EUR 44.3 million; and by the Saxopark, which is EUR 28.6 million. So a large part of the increase that you see here is from those 3 items. In terms of current assets, you see a slight decrease, which is mixture, as you can see here, by -- of an increase by those acquisitions in net working capital that we see there and in terms of decrease of the liquid funds because we were paying for those acquisitions obviously. That's on the asset side.On the liabilities side, we do see a nice increase in equity. We have the increase in equity to EUR 215, the number on the right-hand side top. This increase of EUR 22.3 million is largely driven by the comprehensive result of last year of around EUR 30 million and then, obviously, the dividend paid, we deducted a bit more than EUR 13 million. And that's the reason why we are looking at change of EUR 22.3 million, nice increase. And overall, obviously, a decrease in equity ratio due to the increase in overall balance sheet we have seen there. But nevertheless, we are still looking at EUR 54.9 million (sic) [ 54.9% ] equity ratio, which is a pretty solid balance sheet as we would see that. So we feel fine with this kind of situation here.In terms of liabilities, current debt and noncurrent debt, at the bottom, if you add those 2 up, you do see an increase, EUR 276.7 million in terms of debt. This increase of EUR 60 million is largely driven by financial debt of EUR 56.4 million we picked up in order to pay for the acquisitions that we have seen. So as mentioned in the beginning, acquisitions of the 2 companies and the Saxopark real estate are actually driving the balance sheet expansion, and the equity ratio gives us a strong feel that we are in a very stable and solid situation regarding our balance sheet. Now if we change the balance sheet to the more operational perspective, away from the accounting balance sheet to the management balance sheet and deduct those things that are noninterest-bearing in there. We look at the balance sheet as of 30th of June, the management balance sheet, and you do see the same picture again we looked at, it's these 3 items that influence the balance sheet. We do see the increase in capital employed here, this time of around EUR 80 million, EUR 80.2 million increase, again, driven by the noncurrent assets. We just talked through that. And in terms of cash and net working capital, we see slight changes, and the cash decrease is obviously driven by the payments we have done. So it's now reduced to the cash needed level of EUR 11.7 million roughly that we need at all in the system more or less. And we have a net working capital slightly increased due to acquisition, due to seasonality, and that's the movement we see there. On equity side, no other perspective -- on the capital investment side, no other perspective. You see the increase in equity of EUR 22.3 million, again, to EUR 215 million. And now it becomes very visible at the bottom. We have increased the gross financial liabilities by those EUR 54.6 million (sic) [ EUR 56.4 million ] that I just talked about. So that was the management balance sheet in a yearly perspective. And now to see what actually happened within the quarter, let's look at this perspective in a bit more detail, what happened from 30th of -- 31st of March to 30th of June. What we -- while we just saw a big movement in this long-term perspective we just looked at, we see hardly any movement within this quarter. The changes there are pretty eventless, quite frankly.So you will see in a second that the overall capital employed has increased by EUR 3.6 million. And now let's look at the influencing factors, the components of that. If we look at the noncurrent asset, you see a total increase of EUR 1.3 million within this quarter, which is not a lot. You see that we did invest, as always within this period of the year up there, EUR 3.1 million in property, plant and equipment. Then there is no other big change in those rows below. The only one that is compensating for most of that is the decrease in financial assets. And part of the number that we do see in there is the change in a start-up participation we have had. We have disposed of a little investment we've had there. And that's the reason why we see the minus -- or part of the reason why we see the minus EUR 3.3 million there. That -- the disposal price was slightly more than actually we invested at the beginning. And the profit, if you want "the profit," we have made sure that it's an other profit. And as we have -- after we have opted to put the, according to IFRS 9, change -- to put the changes in fair value not into our balance -- into our P&L, but to put them into the OCI, the other comprehensive income, you do see a slight profit there actually in Q1 of this year already. So that's what's changed there. Overall, noncurrent assets, an increase of EUR 1.3 million, no big change. Looking at the net working capital and there too, is the operating net working capital, a decrease of minus EUR 3.8 million here. The inventories and the current trade receivables actually decreased, driven by seasonality. And more or less, the same is true by the current trade payables. They are increasing, not so much driven by inventories, at this point here, it's increasing in this time of the year due to typical investments we are doing and to, for instance, IT consulting things that we are preparing in order to be up and running fully and 100% for our important season. And that's the reason why you see increase in trade payables here of EUR 2.8 million, which does not fit, first due to the decrease in inventories we have seen there. So overall, an operating net working capital which is reduced by EUR 3.8 million and fully reflects our seasonal development we are seeing at this part of the year.Now continuing with the net working capital and moving from operating to other net working capital. On the side of gross working capital, we do see the only change in there substantial is the plus EUR 4.4 million in terms of receivables from income tax refund. Now this is our -- throughout the year, our way to book the tax payments there. We are changing any tax payments into current receivables and tax rate, full tax -- full-blown tax only at the end of the year. And as we have higher tax prepayments, we mentioned that to you already last year, as we have higher tax prepayments, these show up here as higher current receivables from income tax refunds. So that's just a booking situation throughout the year. If you run down and change from gross working capital to current liabilities, what can be seen there, current tax liabilities is not a big item, just made by the payment of trade tax, the change we have there. And other current -- the current other liabilities are due to the settlement of wage and salary liabilities from outstanding vacations as the vacations have been taken more, and obviously, that makes sense to see this number here, we would say, also driven by seasonality.So other current liabilities, a decrease in total by EUR 5.1 million. If you net that with the other gross working capital, those 2 obviously add up because you subtract the negative liability change. We have other net working capital increase by EUR 9.6 million. But as the next segment shows, this is reduced by the operating net working capital we just looked at on the page before, which was decreased by the EUR 3.8 million. So we have a total net working capital change of EUR 5.8 million, which means no big change actually. And if we then take the noncurrent assets and the cash and cash equivalents, the changes we have seen there, all that boils down to capital employed change of EUR 3.6 million within the second quarter, which means pretty much no change in this quarter in capital employed. If you look at capital invested, we can do the big check. At the right-hand bottom, the EUR 3.6 million shows here up again. So the numbers seem to be all right, which is a good check. In terms of equity, we have talked already about the change overall within the year. Now within this quarter, the minus EUR 16.9 million is obviously in addition to the profitability situation, largely driven by the more than EUR 13 million dividend payment we have had in June. And that is the biggest change you see throughout all this year, quite frankly. So all in all, we have a [ contrary ] change at the bottom there in gross financial liabilities, obviously, due to the seasonal increase in business operations and due to the dividend payment. And we pick that up in our financial liabilities. So all in all, capital invested, just the same change again of EUR 3.6 million. So that was management balance sheet, capital employed, capital invested. If we change from there into the cash flow, let's look at an overview level here first. You do see that -- the first thing that strikes your mind just looking at the cash flow from operative business, that there is this cliff from '16 to '17 where we have the decrease from EUR 7.7 million to EUR 1 million positive. Now why is that? And obviously, we have talked about that already last year and in Q1 actually of last year. Because we have this big payment of the old VAT we only had to pay in 2016. And when the VAT changed, then, in 2017, there was a lot more VAT to pay in there. And this big payment of VAT actually happened in 2016. So that's a big change we are seeing there. In addition to that, obviously, the change in earnings level we have seen from '16 to '17. But now if we compare '17 to '18, we are pretty much on the same level as the year before. So that's why we say we are fully in line operationally where we want to be. In terms of investment level, you do see there is a little bit more, minus EUR 10.9 million, we'll talk about that in a second in a bit more detail, but also on the same level. So overall, free cash flow is driven by seasonality, driven by the earnings situation of our 2 acquisitions, which were exactly planned to be where they are right now. So free cash flow Q2 is fully in line with what we expected.If we look at that in a little bit more detail, how it's composed, or what it's composed of, you do see the EBITDA, start at the beginning, which is minus EUR 2 million. Noncash factors, changes in the accruals and so on, we have an additional EUR 0.8 million improvement there already, so that's helpful. In terms of decrease in operating net working capital, we looked at that already. Compared to 2017, we have especially a decrease in inventory and receivables here if we look into the details, so that is driving this. So you do see the EUR 3.3 million in terms of cash flow from operation and net working capital on our balance sheet here, which is comparable and on the same level as the EUR 3.8 million changes for this situation we've just seen when we discussed the balance sheet. And the difference of EUR 3.3 million you see here and the EUR 3.8 million we just looked at is due to the acquisitions mainly that we have seen, but also due to other accounting factors, but the 2 numbers match.Next change is increase in other net working capital. Now we have paid a bit more VAT because of the strong, especially also, CEWE PHOTOBOOK business in Q1. The VAT payments happened in Q2, and that is the decrease we can look at here. Taxes paid, no big change there. And that adds up to an outflow in operative business we have seen there of minus EUR 0.5 billion increase there.In terms of investments, I think we looked at that already. We have the additional increase in investments in fixed assets, which is seasonal investments, EUR 3.4 million more than last year. Last year, we have been a little bit behind, as you could always see by the end of the year. So this year, absolutely in line with what should happen is supposed to happen there.Other changes. Investment in financial assets, you do see the EUR 2.9 million therein, it's this little -- part of that is this little disposal of the start-up participation we have there. So overall, free cash flow just reduced by EUR 1.8 million and as mentioned on the page before, quite frankly, pretty uneventful.In terms of ROCE, now the ROCE situation is obviously driven by the middle of the year and by the acquisitions we have looked at. Middle of the year means the 12-month EBIT has a little bit dipped because we're getting the bad month in terms of EBIT terms, like Q2, now into our 12-month rolling ROCE -- 12-month rolling EBIT calculation, which is the reason why we have the slight decrease there to -- down to EUR 46.3 million in terms of 12-month EBIT; whereas, on the other side, the capital employed was increased, especially by the acquisitions, as we discussed, to now average of 4 quarters to EUR 280 million roughly. And that's the reason why the ROCE was down now to EUR 16.5 million, which means -- 16.5%, which means going forward, our -- in the next months to come, our EBIT should increase, if everything goes as planned, as we are getting in, at last, the Q2 -- sorry, Q4 quarter, which is supposed to increase in terms of EBIT. And then we will see a slight increase there again; whereas the -- on the other side, the average capital employed is also going to increase for the next 2 quarters to come because the average means that the acquisitions are going to eat their way into this average number, which means that the overall ROCE could decrease a little bit more. But according to our view on that, it should stay around the 15% of ROCE, which means CEWE is clearly value generating.And that was details on the financial side. I think Christian is going to close our presentation with a view on the outlook.

[Christian Friege, Chairman of Management Board & CEO]

And that outlook is not very surprising. As we said before, both Olaf and I, we are on track where we need to go. And that means that, as you can see on this slide, for all indicators, specifically for the revenue and the EBIT, we confirm our outlook. You can see that more easily on the revenue when, in the first half of the year, we've an increase of 8.5%. You know that the third quarter, again, is one of those quarters that is a little bit suffering from the seasonality changes that we've seen over the past years. But we have all instruments on going forward as far as the Christmas quarter is concerned, and I'm personally confident that Q4 will lead us to achieving the revenue and also the EBIT goal and the outlook that we have presented here. And that confirms the view on our company, which actually lets us achieve on this higher level of around EUR 50 million in EBIT. As we've achieved in 2016 and 2017, we will be around this EUR 50 million, between EUR 48 million and EUR 54 million, in fact, again this year. And there is no reason for us not to confirm this outlook. And that leads me to invite you, if there are any, to ask us any questions. Whatever we can answer, we will obviously answer.

[Operator]

[Operator Instructions] The first question comes from the line of Christian Weiz from Baader Bank.

[Christian Weiz, Analyst]

First of all, how do you plan to compensate for the rising raw material costs, which you mentioned with regard to online print? You mentioned paper. You mentioned transportation. And here, again, the current background in the online printing industry, that there is tough competition. But I would assume that these new pricing input costs also affect the photofinishing division. So how do you plan to compensate for these rising costs? That is the first question. Second question, what's going on at futalis? And the third question, what's the strategy with regards to the online print in general, given the problems we thought were temporary but now seem to persist? I again refer to the tight competition, competitive price situation in Germany but also the Brexit. And to me, it seems that this division has not come out of the woods.

[Christian Friege, Chairman of Management Board & CEO]

If I can come to these questions, and I start with the last one. As you said, this division doesn't come out of the woods. We're seeing a lot of changes here, not only in the market, but also in our setup. And I pointed out before that we feel that the critical size that we are approaching, with the addition of LASERLINE and the benefits effects that we expect from the addition of LASERLINE, will indeed help us to bring this division into the planned profitability and growth scenarios. So I can see your worries. And clearly, as always, there are developments in the markets that one wouldn't have expected or hoped for, but still, we feel that we are set up in a way that can actually let us be successful in this division.

[Christian Weiz, Analyst]

In your view -- sorry to interrupt there, but do you have kind of a medium-term target for photofinishing with regards to profitability or for…

[Christian Friege, Chairman of Management Board & CEO]

Yes. We have medium-term targets, and we include these medium-term targets in our outlook that we annually publish. As far as futalis is concerned, we have progress there in some minor investments that support the efficiency and also the opportunities to grow this business. And as we always do in the board of CEWE, we review the strategy for different parts of the business regularly and discuss them with our Supervisory Board and the Board of Trustees of the foundation. And we will obviously also look at futalis and the long-term prospects in due course. As far as the raw material cost is concerned, there is good and bad about it. The bad is that there are raw material increases, and in fact, there are raw material increases -- or material cost increases that we feel in our P&L. The good about this is that it's not only us who are concerned but actually everybody in the market is. We are doing 2 main things, and that goes across the commercial online print and the photofinishing. We are always looking at increasing our efficiencies. That is where we come from as a company as far as our photo printing and our overall setup, in fact, comes from. So wherever there is an efficiency, we are hunting for it. But we are also, clearly, wherever it is possible and wherever it can be argued, increase our prices according to the cost increases. And that is inevitable. But unfortunately, as you say, sometimes there is the market that actually doesn't make that as easy as one would wish it would be. But also, in terms of some of our agreements, we have longer-term agreements with trade partners where there is a time lag within which we can actually get these price increases implemented. But I can assure you that we are very much aware of the fact of these material cost increases and we are tackling them continuously.

[Operator]

Currently, there are no further questions. [Operator Instructions] There are no further questions. I will now hand over to Dr. Christian Friege for closing words. Please go ahead.

[Christian Friege, Chairman of Management Board & CEO]

Gentlemen, it is a great pleasure to be the CEO of this company, I can assure you, because there is so many great people working here to make our customers happy and to also work towards the benefit of the company. We've indeed today published a letter to all employees with a Christmas tree on the cover. And the Christmas tree is not a Christmas tree from stock photography, it's actually a Christmas tree that we have already put up in a number of locations across the company here at Oldenburg. And we are putting this Christmas tree up, and we are talking about this to everybody in the company, because we are so focused on Q4. And with all the things that have been said today, one key message is the company is focused on the season. And we are, because of this focus and because of the quality of the focus on customer satisfaction, convinced that, at the end of the year, we will be very smiley, sitting here about the results of the company, within the lines of the outlook that we've presented to you. So with that, thank you very much for your interest. I truly hope that you will continue to be watching us with friendly eyes. And I'm looking forward to talking to you, hopefully, on Photokina, but certainly, no later than our Q3 telephone conference. Thank you very much. Bye-bye.

[Olaf Holzkamper]

Thank you. Bye-bye.