Bilfinger SE

XETRA:GBF

Earnings Call Transcript 2022-Q3

[Bettina Schneider, executive]

Good afternoon, ladies and gentlemen. A warm welcome to our Conference Call on Bilfinger's Third Quarter Results '22. My name is Bettina Schneider, and I will lead you through this call.

[Operator Instructions] The conference call is being recorded. With me here in the room in Mannheim are our CEO, Thomas Schulz; and our CFO, Matti Jakel. After the presentation, you will have the opportunity to post your questions via phone or via chat in the webcast.

With this, I would like to hand over to Thomas.

[Thomas Schulz, executive]

Thank you, Bettina. Hello, everybody. Nice greetings here out of the headquarter, Mannheim, Germany. And let me start with the key highlights for the quarter 3. We had a very good order intake. We are 19% organically up in the order intake. We are 11% organically up in the revenue. Though the quarter reflects quite a good success for our business in all areas, EBITA margin on a side moved to prior year like-for-like 3.4%, roughly similar, and the cash flow better than last year in the comparison like-for-like.

What are the main drivers for us? It's the big demand all over for more efficiency and more sustainability from our customers. On the operational side, we confirmed the outlook from 2022. On top of it, we informed you in quarter 2 regarding a strategy update. We will have a Capital Market Day on February the 14th next year to give you significant more details on that. And then it's about the future of our company. If we then look in the last part, last bullet, what we have, it's the efficiency program, and I will come quite in detail during the presentation on that program and the meaning.

But before we go into the figures, one slide about safety. Safety is for us unbelievable important. We run for zero accidents. We run for the best safety environment what we can create for us, for our colleagues and subcontractors. You see that we are since 2020 a little bit on the wrong path, but all the measurements are taken to counteract on it. We are safety-leading in the industries and as the door open up for a lot of companies and a lot of societies where we're active in.

Now to the figures. You see here on the upper left part, the orders received, and we start this time with the quarter 1 '21 to show you the whole development over more than one year, how our order intake developed. And you see that we have since beginning of '21 quite a good run. 22% growth from quarter 3 last year to this quarter is quite a significant improvement. 60% of that is framework and service work, 40% projects. To highlight here is our good development of the order backlog, which is quite the highest for a very long time.

If we then look down to the revenue, it's a 14% growth. Here, the same from quarter 1 '21, coming from EUR 833 million to EUR 1.075 billion is a very good development. All the orders we received and all the areas what we have, show orders received big increase, same in revenue. We would like to highlight here biopharma and energy transition and transformation, which developed quite well. Year-to-date, 35% of our business is out of what we define as projects and frame and service contracts.

With that, into the market development. For us, continued positive demand in all areas, in all industries, all the competencies what we can offer despite all the well-known challenges in the global economy. So for us, the market development is positive and will be positive. If we look into the chemical and petrochem business, roughly 30% of our revenue year-to-date, for us from a trend side way. What are the long-term developments? What are the long-term drivers? Efficiency, sustainability, energy cost reduction to have a flexibility where resource raw material is coming from, to have flexibility on skilled workers and to look into capacity expansion, especially North America and Middle East and deterioration more in Europe.

If we then look into the current situation, we see a clear increase of demand, ongoing increase for combined industrial services. And that in -- especially into energy transition as well as efficiency improvement of existing or new plants, new technologies as well as always a sustainability impact in a positive way. From a regional point of view, we see actually the world relatively stable in the area where we operate, Germany more weak.

Our positioning, we have asset maintenance, industrial projects and plant turnaround. So we cover the whole scope in that industry. 78% of the business in chemical and petrochem comes out of Europe, 15% out of North America and Middle East and 7% out of technology. You see which kind of potential we have here to go more into other areas than we have only in Europe where we have quite a significant positive position.

On the right side, it's about the energy, roughly 15% of the revenue this year. Our trend is definitely upwards. The long-term drivers for that industry is, of course, CO2 reduction, sustainability and adhere to efficiency improvement. Of course, on top of it, to get independent from one source like Russia from one energy deliverer like gas to fragment to be more independent, and of course, government subsidies.

The current situation is a significant increase in green energy investments, which for example, is electrification of industrial assets, the revival of nuclear, and of course, all new technologies what you can imagine about hydrogen, carbon capture, and we are all in that. It doesn't matter if it's battery production. It doesn't matter if it's commercial heating, cooling, hydrogen, carbon capture, storage, we are with our competence all over and contribute already today in a big, big amount to these kind of new technologies as well as what we call brownfield, existing infrastructure to improve inefficiency always with a sustainability note on it. 55% of that revenue comes out of Europe, 8% out of international and 37% out of technology. Here, you see another growth potential for our company.

If we then look into oil and gas -- revival of oil and gas, our trend is definitely up, makes roughly 20% of the revenue. Long-term development look into the profit of the big companies in oil and gas, record-high profit levels, investment is back on the list. It's an underinvested industry, but in the investments, it's not only to revitalize existing infrastructure, it is actually to make it more green, more sustainable, more efficient, and on top of it, to use new technology, new ways of doing energy in existing infrastructure.

For us, the current situation is that we get a significant improvement in investment levels into our books. Based on that, customers are actually very eager with reduced own planning departments, engineering departments to talk with suppliers, with companies, with partners like us to help them. On top of that, of course, the hydrogen, the carbon capture is here a big business tool.

We do asset integrity management, we do new technology, we do technology on existing plants like roping and so on, which is very attractive for the customers to order from us. 84% comes out of Europe, 9% out of international and 7% out of technology. When you compare this 84% with the world map where oil and gas is coming from, then you see which kind of potential we have in the Bilfinger Group.

On the right side, pharma and biopharma makes roughly 5% of the revenue year-to-date, trend definitely up. Here we talk about demographic development. We have more people on earth, more people move from the third to the second from the second to the first. And with that movement, utilize significant more pharma and biopharma products. That drives growth. On top of it, we have deglobalization, which means a lot of areas would like to have the production in their country or minimum in their area so that they can influence it. That's out of the corona experience.

If we then look into the current situation, we have movements, investments, demands all over with quite a big customer group, partly new customer group out of the last few years. It's a very profitable business. We are with our life cycle services, with our engineering to prefabrication, construction maintenance business very well positioned. 40% comes out of E&M Europe, technology was 60% and nil out of International, which is, say, in itself.

Out of that, when we talk about that, it's about innovation what we offer. It's competence combined with innovation. Today, a short example of that, the so-called combined digital inspection service. We combine existing technology, put it together, offer it as a service package with a special digital product on top of it to our customers. And here, we are able to reduce cost up to 80%. We improve safety by having people not operating on the site, operating actually over a screen and a joystick to make a digital twin and putting that immediately into the planning of the customer or in our own resource to help clients to see failure and downtimes coming, which is predictive maintenance. We are well positioned in that area too.

Out of that innovation, we have to look into what are we doing with the company? Where are we going? And of course, you can imagine that we saw the reaction yesterday and today in the market, and we know that we have to give you some more information. Let me start with the strategy update. You saw in the overall market analyze, which kind of business we do today and what we can cover more.

Of course, with our goal, with our vision to be the #1 in efficiency and sustainability improvement as an industrial service provider. We look very much into these areas where we have competence, where we are profitable, where we have customer contact and we would like to have that over all segments and all regions where we work in. This is a self-propelled growth and profit growth and cash growth what we see. Through standardization of business models through standardization of products and the way how we act with customers, that we will explain and show you very detailed on the 14th of February, 2023 on the Capital Markets Day.

Then we did, of course, tried a lot of things. And before too, it's a further development. One part what we would like to highlight here is a couple of months ago, we have a new management structure, the so-called Group Executive Management, which contains all the important central functions and business functions in one team, how we guide the company. This increased significantly the efficiency and collaboration and brings top management closer to the frontline, closer to the customer. And on top of it, we have an efficiency program. All that we do to be and to succeed where we are partly in some areas and some industry to be the #1 for efficiency and sustainability improvement for our clients.

Now to the efficiency program. The efficiency program is something what we place as a step change to enable the company to be agile and lean in the administrative functions. It will unlock resources. It will make us significantly faster in decision and optimizing and simplifying structures and processes. On top of it, we have in that program, an investment in education and training. But let me tell or explain a little bit what it actually means. It means that we look into the facilities to reduce rental facilities, to combine smaller facilities in one and to optimize the whole facility management part what we have in the group worldwide. There is a big improvement of cost possible.

On top of it, the spend -- the cost spend that we have out of the administrative structures and our doing has to get reduced quite significantly. Why can we do that all, because we digitalize more, we standardize more, we optimize more and we have a clear focus on a strategy to make us the #1 in efficiency and sustainability. On top of it, of course, the simplification of administrative structure. That means less management levels, bigger teams, more flat in the hierarchy. All that has a potential of EUR 55 million. And that potential of EUR 55 million we decided to put 1/4 of it, roughly EUR 12 million, EUR 13 million into training and education and EUR 42 million to the bottom line for the cost of EUR 60 million.

Why are we doing that with education and training? It is important to understand that Bilfinger is a people business. And to attract people and to develop the competence and the quality towards the customer, you have to invest in education and training. We did that before, we will go on to do that, but now more strategic long-term and fix as a clear investment into the future. So EUR 12 million, EUR 13 million of that will go each year into training and education to make that happen.

If we then look further, of course, such a program with a return on investment below 2 years will have a positive cash effect and a positive profit effect throughout the time to come. You take one step to do it and to finalize it and not choosing the way to split such an activity over 3 or 4 years because you will then not see the results coming to the bottom line. And you will see the result on the bottom line. And you will see how many people we have to reduce, how many facilities we have to take out and how we restructure. We will be unbelievably transparent. And for that, we inform you that we will have a virtual lunch meeting on the 12th of December, and you will get the invitations over Bettina's department to inform you very transparent about that. This is a program which will happen, and I'm used to. So that what we announced that it will happen. I guarantee you that.

Out of that, why are we doing that with the strategy, with the efficiency program? Fairly simple. The business potential what Bilfinger has is largely untapped in growth, in profit, in cash, and that is what we do. We focus on that where we are good, and we will do that all over where we want to do it. And of course, we promised you to have at least 5% EBITA in 2024. And at least means we see, of course, an upside after that. But to achieve that, you have to prove it. You have to make it happen. And of course, you target that what you have at first, what you have in your hands. And that is to simplify and to optimize your own being, that means structures and activities.

With that, I would like to give to Matti, our CFO.

[Matti Jakel, executive]

Thank you very much, Thomas. Good afternoon from my side.

Let me give you a bit of a flavor on a good successful quarter 3 in 2022. As Thomas said, the orders grew by 19% organically, the revenue 11%, which makes already for a very healthy backlog for the next year 2023. The EBITA for the quarter was EUR 37 million compared to EUR 54 million in the prior year quarter, which had EUR 19 million in real estate disposals and EUR 3 million in special items. So on a like-for-like comparison, this quarter, we achieved an EBITA margin of 3.4% and we're on the prior year level.

Net profit of EUR 22 million for the quarter compared to EUR 41 million, again, last year's quarter 3 was impacted by those positive one-offs. The gross profit grew to EUR 114 million in this quarter compared to EUR 106 million. The gross profit margin was 10.6%, slightly lower than the 11.3% last year. SG&A expenses, and Thomas referred to the efficiency program, were EUR 78 million this year and quite a bit higher than the EUR 71 million last year. While the percentage of 7.3% looks like an improvement over last year's 7.6%, the absolute numbers are not going in the right direction and this underpins the necessity for the efficiency program.

EBITA, as said before, 3.4% and compared to last year on a same level when you eliminate the one-off effects. We also see improvements in working capital year-over-year. Last year, we had net trade assets of EUR 500 million, this year EUR 473 million. This was helped by advanced payments from the very good order intake in some of the project. Free cash flow, EUR 69 million, on the same level as last year of EUR 72 million. Again, if you compare the EUR 31 million or eliminate the EUR 31 million in real estate disposal of last year, it was a nice improvement over last year's quarter.

A bit more flavor on the segments. E&M Europe, orders received -- again, nice organic growth, 13% on the order intake side, book-to-bill ratio of almost 1.0, healthy backlog of EUR 1.8 billion for this segment. Revenue, 6% increase, EUR 676 million compared to EUR 633 million in the prior quarter, a bit down from the second quarter. Obviously, we had a very successful turnaround season in the second quarter. So this is as we would have expected it.

Profitability in the third quarter, 5.4%, EUR 37 million for our largest segment, Europe, a bit of an uptick over last year where we had EUR 33 million and 5.2%. The revenue split in terms of the work type that we have, 75% is with frame and service contracts. So a very strong recurring base in E&M Europe. 25% of the revenue is within project. In terms of the industry and customer split, 35% is chemical and petrochemical, 25% oil and gas, 10% in the energy sector, 5% is in pharma and biopharma. So what Thomas elaborated before, you can see quite a bit of potential here as well.

E&M International, a significant growth on the order intake side from EUR 116 million last year to EUR 223 million this year. There is a bit of a help with the exchange rate, but plus 74% organically demonstrates that the right decisions we have taken in the past and the shift from pure construction projects to more frame and service work is working quite well. Revenue also grew by 40% roughly from EUR 141 million to EUR 218 million. And you can see the progression of revenue if you look at the bottom left corner from EUR 110 million to EUR 218 million, that's almost 100% over that period of the quarter -- 7 quarters.

On the profitability side, the EBITA was slightly negative in Q3, however, better than last year. So we're working our way out of the projects that were acquired in the prior periods, and we expect a solid quarter 4 in the international business. The split by revenue, frame and service contracts 65% versus 35% on the project has improved over the period. The revenue split by end customer, 25% is in chemical and petrochemical, 10% oil and gas, 5% in energy. And as Thomas said earlier, that's not yet work in pharma, biopharma, life sciences. The other end customers, 60%. As you well know, we have a large framework contracts with Procter & Gamble. So we're in the consumer goods business. And also with our Centennial, we do quite a bit of government business in the United States. So there's plenty of room to grow on our core end markets.

Technologies, order intake quite interesting from pharma and biopharma in the life science arena from EUR 170 million last quarter 3 to EUR 187 million this year, so a 10% organic growth. Book-to-bill 1.23, which makes for a good growth going forward. Revenue increased from EUR 141 million, 8% to EUR 153 million this quarter. Profitability almost on the same level as last year with 4.0%. Revenue split here, as you would expect, very much on projects, 95%, but we also have one or the other service and frame contracts in the Technologies segment. The revenue split by end customer is -- really reflects the overall Bilfinger portfolio between chemical, oil and gas, energy, and obviously, the largest part here with pharma and biopharma.

In summary, I would say, a good and solid quarter 3. However, the focus continues to be on margin progression and cash generation, as Thomas said, looking at the strategy going forward.

And with that, back to you, Thomas.

[Thomas Schulz, executive]

Thank you very much, Matti. So the operational outlook for 2022 is confirmed. We will deliver a significant increase in the revenue and we will deliver operating -- a significant increase in the EBITA, but impacted by the item Ukraine-Russia war, which was already communicated in quarter 1 and by the efficiency program now in the quarter 4. Free cash flow will be at prior level.

To combine and to sum it up, orders very good, 19% up; organic revenue, 11% up; EBITA as a side move in like-for-like comparison; cash flow slightly or better than quarter 2021 quarter 3; drivers are efficiency and sustainability. The operational outlook confirmed. The Capital Market Day on the 14th of February to show which kind of further development of strategy we have with profitable, sustainable growth markets and competencies. And on top of it, the efficiency program to improve our cost base in the -- especially the SG&A, with the G&A as a clear focus.

With that, I would like to give to Bettina regarding the Q&A.

[Bettina Schneider, executive]

[Operator Instructions] First question comes from Michael Kuhn, Deutsche Bank.

[Michael Kuhn, analyst]

A few questions from my side and maybe starting with the efficiency program and the provision. So I think you told us about your motivation there. But looking at your medium term target of more than 5% margin, would you say that implementing that program was necessary to surpass the 5% margin or would that rather add extra potential of mathematically around 1 percentage point? So how should we think about that in the medium term context?

[Thomas Schulz, executive]

What I can say is, when you see that you are with a higher revenue still on a similar level than the year before with a significantly lower revenue, then of course, you know that you have to do something on the EBITA. And we announced that we want to be at least 5% from 2024 or in 2024, and we will achieve that. And then you do, of course, steps what you implement yourself, especially in the combination to look what we do with the strategy. So it was necessary more than it is extra.

[Michael Kuhn, analyst]

And then also on the context of profitability, obviously, the gross margin was down in the quarter, although you obviously want to improve in that area as well. Is that still a reflection of some contracts not being structured as they should be or is that more a function of rising inflation currently?

[Matti Jakel, executive]

I would say, it's a bit of both. Inflation does play a role. We have the ability to pass on inflation cost to our customers via our contracts that do have escalation clauses. However, it depends really on the way the individual contract is structured and written. So there are time lags between experiencing the cost increase and our ability to then pass this on via better pricing or increased pricing. That's one element in here. And the other element clearly is that we do have one or the other contract in our books that has not progressed as well as we would have liked to see it, to put it this way.

[Michael Kuhn, analyst]

Not proceeding in the sense of this would be contracts, you would like to renegotiate or rather get rid of?

[Matti Jakel, executive]

No, these are contracts that we'll complete this year. And they just did not progress on the performance side as well as we would have liked to see it. But this is mostly in those areas that we do not want to continue as a service and as a contract for them.

[Michael Kuhn, analyst]

And then one more also on the medium term perspective. Obviously, in your targets, there is also an element of M&A included. Do you see opportunities in the markets currently or is it rather difficult?

[Thomas Schulz, executive]

No, we see, of course, opportunities in the market and we are definitely attractive. We get quite a lot of offers to look into, not only that we figure that out through our frontline, through our sales organization ourselves. Actually, the market for M&A opportunities is looking good. And we communicated that before that we are looking predominantly into organic growth, but where we see that we have not the time or the competence or customer contact, of course, we are open for M&A, but it has to deliver a shareholder return.

[Bettina Schneider, executive]

Thank you, Michael. Next question comes from Gregor Kuglitsch, UBS.

[Gregor Kuglitsch, analyst]

Can I come back to the efficiency program? So I'm looking here, I think your sort of annualized SG&A cost is, I think EUR 300 million or thereabout. So your cost saving program I think is nearly 20% of that. I guess, I wondered -- I mean, that sounded a very large number, unless I'm missing something or you're doing something in the cost of goods sold? I mean, what are you actually cutting out? Because I guess, where I'm coming from here is, I look back the last 8 years or something like that and you've kind of -- obviously, I appreciate you're not running the business, but there was a restructuring around virtually every year. So surprising to see that there's still this much fat left in the organization.

And maybe sort of a second question to that, I mean, you talked about digitalization, [ automatic ]. Have these things already happened or will these things that you need to do in the future in order to ensure that that cost take-out is actually a sustainable thing to do?

And then the third question, and you sort of started talking about some contracts that weren't perhaps going that well. Is there sort of a chunk of revenues that we need to think about taking out of the equation as a consequence of that or do you think you can grow the business, let's say, in organic terms over the next few years, all in?

[Thomas Schulz, executive]

First, of course, I have to say it like that. If you look into -- I'm in since beginning of March and Matti took over since the middle of the year roughly, the CFO position. When you look into that, what you can optimize in a company which is as always the job of the management, then you don't look back and say how many of the programs did I do. You look into that, where are we, where do we have to go? And that is what we did.

When we then look into the area, what we see, and I'm now specific on the SG&A cost at first, a lot happened in the past, but more to come. And the more to come is through simplification and further digitalization. A lot was invested. We can do more with that what was invested. And of course, we will go on to invest in the normal line.

Then the last part in that, if you look into an admin structure in a company, you are not only looking into the group and administrative costs. You look overall facilities, what we have, rental what we pay, costs what we have external, maybe with consultants or other suppliers, what we can do on our own. And of course, you look into that which kind of services you have internally, is that still necessary for that what we have in the strategy and in the future growth. And with that, to the future growth.

If you look into that what we announced in the quarter 3 and what you see year-to-date, I think it's clear that we have a lot of self-propelled growth potentials. And to focus on that, you have to let other things go. Is it big? No, it is not big, small here, small there. But small business takes a lot of attention and a lot of administrative functions to cover it up. And that is what we will let go. And that's part of the strategy where we will give more information.

Whatever is not related with efficiency improvement on the customer and sustainability improvement will be not part of our business in the future. Not that we don't like it, but you can't be focused on everything because then you are not focused at all. And there, we see significant improvement what we have, look only in the oil and gas sustainability demand and how much business we do in Europe, which is definitely not the biggest supplier in that area versus other areas we work like Middle East or North America.

So from that point of view, we see the mid-to-long-term growth, sustainable, profitable growth, future of our company, really positive. The efficiency program helps us to get leaner, agile and less cost more cash, more profit and having the money to reinvest into education and training, which is communicated and discussed and debated in all areas in the world that we have not enough competent people. We will do as Bilfinger step ahead of the others to do more. With that, we are more attractive for existing colleagues and more attractive for future colleagues.

[Bettina Schneider, executive]

Thank you, Gregor. Next one is John Campbell, Bank of America.

[John Campbell, analyst]

One question I had related to your 2022 free cash flow guidance. If I understand properly, I think it's EUR 115 million for the full year of 2022. And if I look 9 months year-to-date, it's plus 12. So I'm asking kind of how much visibility do you have on the sort of expected inflow for Q4? And perhaps, could you maybe describe some of the larger amounts?

[Matti Jakel, executive]

For the guidance for 2022 is and remains that we will be on a similar level as last year. If you look at the Q4 performance of last year, which was very strong, we have right now the same potential as in last year. So for the free cash flow, I think we're very well placed to meet the guidance.

[John Campbell, analyst]

I had one further question, if I could. I noticed that in the Technologies segment, the reported EBITA margin picked up to 4%, I think it was 2.3% in Q2. Sort of how should we think about this going forward? Do you have any visibility on whether that's sustainable or will it continue to be volatile?

[Matti Jakel, executive]

I would think that the profitability in the fourth quarter would mirror quarter 3. So I don't expect to see the same jump as from quarter 2 to quarter 3.

[Bettina Schneider, executive]

Next one comes from Christoph Dolleschal, HSBC.

[Christoph Dolleschal, analyst]

Three questions, if I may. So the first one is on again basically follow-up on like the cost distribution of the program, because the benefits of the program, because SG&A, we talked about that. I know you don't want to be too specific yet in terms of personnel in there, but could you probably tell us how much of a percentage of your workforce is in admin functions or how many people are within admin functions? That's the first one.

The second one. Of the EUR 42 million roughly that you then expect to the bottom line, I mean, how much of that do you really think is going to hit the bottom line, i.e., not being eaten up by inflation, other items that are probably currently not on the block? So how much of that will really, really filter through?

And thirdly, on E&M International. On the last call, you said you would be more picky when it comes to orders to enhance margins. Now the revenue and the orders are massively up, but still negative. So could you probably explain where we are in the sale process of lifting margins in E&M International and the pickiness of dealing with the orders?

[Thomas Schulz, executive]

I think let me start at the end of your question line regarding the E&M International. Yes, you are right. We have a significant improvement in the top-line and the profitability improved over the last few quarters and years, but it's still not there where we would like to have it. For this year, we said that it will be on a breakeven. And that is what we see what we will achieve. And when we look into it, it has more to do that we have to take more business and more orders in the area where we have the high competence and a sustainable profitable growth, as we show, for example, in E&M Europe. And that transformation that we work more and that customer group and that competence area is ongoing. And out of that, when we look ahead with the big business potential what we see in North America, not only based on the green investments, what U.S. is doing, especially based on that what customers -- international customers demanding from us that we give them the same good work as we do in Europe, we see quite a positive development of that part of our business.

Then we look to the EUR 42 million on the bottom line. What I can promise you is you will follow us, you can track us. We will show you how much cost per quarter, how much bottom line improvement out of the efficiency program will be there. You will see how many facilities we shut down or a combined. And that's always the sad part of such a program, of course, we have to let people go. That's part of it because we have too much service, we have too much structure.

So -- and that report will come. And then you can see that the EUR 42 million will come down. The inflation and other things out of the business we have at all to deal with it. That has nothing to do with the efficiency program. That is what we have to deal with it with or without the efficiency program. But we have to give you the transparency and what we saw today and the reaction, the comfort that if we decide something that it happens.

Then of course when you ask about the admin function and how big we are, the thing, without going too much into detail, what we don't report out of our own business structure, I can tell you, we are for that business what we see ahead of us and the strategy to streamline us on efficiency and sustainability combined with the good improvement in internal digitalization, we will have a reduced workforce in the admin function. It's one part of the EUR 55 million. As said, as it is.

[Bettina Schneider, executive]

Thank you, Christoph. [Operator Instructions] There's another question from Gregor Kuglitsch.

[Gregor Kuglitsch, analyst]

Maybe a follow-up then on sort of the path towards your 5%. I mean, I appreciate you're not guiding for next year, but is it -- I think previously you were talking it should be relatively linear in terms of the profit evolution. I don't know if that still holds? And then similarly, the cash flow generation, I guess, will drop next year with the restructuring costs and maybe some working capital build. So maybe some early thoughts on that would be helpful.

[Thomas Schulz, executive]

You know that we are not guiding in the third quarter announcement for next year. But of course, we will have a negative cash impact based on the program. That's clear. Then when we look into the business, you see that in our order book, you see that in the development of the order intake, you see that what we say regarding how the market function and that we actually no matter if it goes up or down, we always have something to do that actually looks good for us.

So we don't see next year as a disaster at all. We are actually quite positive on the year 2023. Then on top of it, with the efficiency program, when you look into that, yes, it will bring us 1 percentage point EBITA closer to the 5%. And we will see and inform you how we see that split over the year, how that will come to the bottom line. You have normally at the beginning of the program, which is intended to have the major work and major activity finalized at the end of quarter 1, of course, at the beginning, more cost and activity. And towards the end of the year, you go to the what you call the run rate out of the year 2023 that we are clean in 2024. And again, that is the right way to go, to have minimum 5% EBITA from '24 on, if not more.

[Bettina Schneider, executive]

So far, there are no further questions. Last seconds, if you still have one. So I think we're fine. We're all set. There are no further questions. And if later on, please contact the IR team. Sorry, Christoph, you have another question.

[Christoph Dolleschal, analyst]

Just one more, because you said the Capital Market Day is going to be on the 14th of February, 2023, but then you also said there is going to be a meeting on the 12th December. Did I get that right?

[Thomas Schulz, executive]

Yes. We will make a so-called lunch meeting where we will inform you more granular about the efficiency program, because the information level what we can send out -- what we could send out yesterday and today, you have to know and you have to be aware, of course, all the respective premiums and functions in such a process has to be invited and part of it. And that's the way how it works in Germany. And of course, we are completely compliant on that and follow that. And then on the 12th of December, we can give significantly more detailed information that you can track us and see that we will deliver.

[Bettina Schneider, executive]

So I guess, yes, we now conclude this conference call. And as I said, please give us a call if there are further questions in the next days. And thank you very much for participating. And hopefully, see you all in-person or virtually latest in December and/or to our Capital Markets Day. Have a good day. Thank you, and bye, bye.