Gerresheimer AG
XETRA:GXI
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Gerresheimer AG
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The conference is now being recorded. Welcome to the conference call regarding the publication of Gerresheimer AG's Q1 results 2022. [Operator Instructions]
Now I hand over to Ms. Carolin Nadilo, Head of Investor Relations at Gerresheimer AG.
Yes. Thank you, and hello, everybody. Warm welcome from my side. Thank you for joining us today to review our first quarter results for FY '22. With me today in Düsseldorf are our CEO, Dietmar Siemssen; as well as our CFO, Dr. Bernd Metzner.
As usual, we are presenting a set of slides accompanying the management's notes, followed by a Q&A session. Please note that this call is being webcast live and will be filed on our website, too.
As usual, and before we start, I have to remind you that the presentations and discussions are conducted subject to the disclaimer. We will not read the disclaimer, but propose taken it as read into the records for the purpose of this call.
And now it's my pleasure to turn the call over to Dietmar.
Yes. Hello, and good morning also from my side. Welcome, everybody. Thank you for taking the time for the call. Bernd Metzner and I will now run you through the excellent first quarter and update you on our revenue guidance also for 2022.
Moving to the agenda, I will start with a brief summary of Gerresheimer's progress in Q1. And I will then walk you through the CapEx deep dive before also Bernd discusses the details of our business performance in the first quarter. I will then wrap up with the outlook. And that's after that, we'll be happy to take your questions.
Most of you are familiar with our formula G strategy process. With formula G, we are successfully transforming Gerresheimer into a growth company, an innovation leader, a solution provider and a system integrator. Today, you will see the next milestone on our journey, very strong quarterly results.
We actually focus on 3 key priorities in 2022. Accelerate, we accelerate our growth even further. Our focus is on High Value Solutions, which continue to deliver. Execute, we consistently execute on our formula G strategy process by translating our strong order intake into profitable growth. And innovate, innovation is actually the backbone of Gerresheimer and the Gerresheimer story. Further investments in our R&D capabilities lead to further growth.
A few words on the current geopolitical challenges. First and most important, we all, of course, hope for peace in the Ukraine as quick as possible. For Gerresheimer, from the business perspective, I would like to add the following. We actually do not have any material direct exposure neither to the Ukraine, to Russia or also Belarus. We are well protected against volatile energy prices due to our long-term hedge. We can definitely rely on this resilience of our supply chains, which has been proven and demonstrated over the last couple of years. Thanks to our pricing power, we are well positioned to manage inflationary pressure. As we did successfully in 2021, we'll also respond to further price accelerations fast and decisively.
We are very pleased to see that the implementation of our formula G strategy process is now clearly showing strong results. Our performance in the first quarter of 2022 is outstanding. Revenues grew organically around 19% and the adjusted EBITDA by more than 10% and the earnings per share more than 8%.
All business segments and regions strongly contributed to this success with our key growth drivers contributing overproportionately. This includes, not new to you, High Value Solutions, our contract manufacturing business, products and services associated with beauty solutions as well as our regional expansion. They all grew revenues by double digits, and revenues in High Value Solutions were up even more than 15%.
This now visible growth is a direct consequence of our well-targeted investments. The strong start into the year and the ongoing high demand in all business areas give us the confidence to now increase our revenue growth guidance for 2022 from high single digit to now double digit. We clearly see Gerresheimer firmly on track to deliver another record year.
In the last calls, we regularly receive questions from some of you recently on our CapEx plans. Therefore, we have decided to highlight this topic and give you more insight into our CapEx priorities. This illustrates how our investments are driving Gerresheimer ongoing transformation.
Our fundamental principle is easy. We invest where we see growth opportunities by following our clear strategy to grow sustainable and, of course, profitable. Three examples of these opportunities. First, several times mentioned, global megatrends. We assess opportunities through the lens of global megatrends. Better access to health care in emerging markets or more self-medication are just 2 examples of these trends. We align with and invest in such trends if these investments will generate sustainable and profitable growth.
Second, the customer focus. With a clear focus on the needs of our customers, we successfully filled our books with a record order intake over the last months and years. We are expanding and optimizing our global footprint and are investing in capacity to serve our clients.
Third, the transformation. We position ourselves as a system integrator and solution provider. This opportunity follows a particularly important megatrend in our client base. The outsourcing of critical parts of big pharmas' own businesses is starting to become the norm. We are now investing in new products and new technologies to answer to that need. We seize these opportunities. We increase our capacity, we expand our business regionally and we sharpen our focus on R&D and also services.
We have a clear road map with a focus on High Value Solutions. Four specific examples of this. One, we are expanding our syringe business across a number of different regions. We will more than double our capacity in the next 6 years by investing in China, North Macedonia and Mexico. At the same time, we are expanding our regional sales organizations. In Europe, we will focus on our high-value lines.
In the area of contract manufacturing, we are growing our business with existing as well as new customers. We are ramping up production, thanks to our autoinjector contract at our site in Pfreimd, for example, or are building a new production line in North Macedonia. We are further expanding our production in Horšovský Týn in the Czech Republic.
In the area of advanced technology, we are developing connected and digital medical devices. These include the new pump for rare disease, the respimetrix inhaler, the SensAIR pump and the new Gerresheimer-owned autoinjector. We will continue to develop our own intellectual property and are also open to acquire further IP that adds to the strategy.
As a leading global producer of vials and cartridges, we are expanding our ready-to-fill vial capacity in North America, in Europe as well as in Asia, especially here in China. Selected initiatives are eligible for government support as vials are part of a critical infrastructure in the health care systems.
I will now hand over to Bernd who will now take over the second part of our CapEx deep dive. With this, I hand over to you, Bernd. Thank you so far.
Thanks, Dietmar, and welcome, everybody, also from my side.
Our CapEx focus is clearly on growth investments. Only around 30% to 40% of our CapEx is needed for the maintenance of our infrastructure and to keep the existing capacity level. We call it base CapEx. 60% to 70% of our CapEx is growth CapEx. On an annual basis, we are investing a high single-digit percentage of sales into profitable expansion projects to drive high single-digit organic revenue growth.
On the right side of the slide, you see the breakdown of our growth CapEx spend. More than 50% of our growth CapEx goes into High Value Solutions, up from around 30% in 2018, 2019. This demonstrates our strong focus on High Value Solutions and shows that we put our money where our mouth is.
Investments in High Value Solutions means also investments in higher-margin businesses. We benefit from dynamic market developments in biopharma and diagnostic and focus strongly on biologics and injectables. Essential parts of High Value Solutions are Elite vials, RTF vials and RTF syringes as well as our growing portfolio of smart devices in Advanced Technology. The average adjusted EBITDA margin in this important field for us is above 30%.
As shown on the right, between now and 2028, the growth of our pharma High Value Solutions will outperform the rest of our business with a CAGR of around 25%. By 2028, we expect pharma High Value Solutions to account for more than 30% of our revenues. As you know, we are committed to expand our Gerresheimer EBITDA margin to between 23% and 25%. One of the key drivers are investments in High Value Solutions, growing their share of our revenues and bringing higher margins.
Finally, let's take a look at the financials of our investment program. With our investment program, we are committed to an attractive ROCE target of 15% midterm. What are the ingredients for that? First, we have a robust holistic capital allocation process. Our investment decisions are based on KPIs like IRR, payback period and NPV. As a general rule, we will only start and realize projects which have an expected IRR of at least 15% as well as a payback period of 5 years or less.
Second, we aim to invest ahead of the curve and invest into attractive growth markets and, as you have seen before, with an emphasis on superior-margin High Value Solutions. Third, we are also continuously working on improving our CapEx efficiencies through less capital-intense business models which are more R&D and royalty-based than today.
Fourth, to improve our capital intensity, we already initiated the so-called Project CapEx 75. With this project, we intend to reduce our CapEx without limiting our sales growth. In this project, it is all about improved project planning to find the optimal specification for machines and production processes and, finally, about the best buy and source. We are convinced that we have huge potential in this area to improve our capital efficiency. With these 4 ingredients, we strive for a 15% return on capital employed midterm.
After this CapEx deep dive, I will now elaborate on the key financials for the first quarter 2022. We had a very good start to the year. Reported revenues increased from EUR 303 million in Q1 2021 by 22.4% to EUR 371 million in Q1 2022. We had an FX tailwind of around EUR 10 million, mainly coming from a stronger U.S. dollar. The organic revenue increase amounted to 19.1%. This organic revenue growth rate includes a tailwind of around 6 percentage points from pass-through and sustainable price increases, a clear proof point of our strong pricing power. We will zoom into the detailed pricing effects shortly.
The adjusted EBITDA increased from EUR 54 million by 13.5% to EUR 62 million in Q1. FX support was EUR 2 million, resulting in an organic adjusted EBITDA growth rate of 10.6%. Please note, Q1 2021 was still a lockdown quarter without any inflationary pressure. Going forward, we are very well hedged against exposure of volatile energy costs.
The adjusted EPS increased from EUR 0.57 by 10.5% to EUR 0.63. Stripping out the FX tailwinds, organic adjusted EPS growth amounted to 8.5%.
Before we come to the divisional performance, I would like to zoom into the pricing effects that supported our revenue development. In Q1, our organic revenue growth rate for the group was 19.1%. The strong revenue growth can be divided into volume and price effects.
For the price component, we can separate 2 effects: first, the tailwind from contractual pass-through effects mainly related to higher resin prices; and second, the tailwind from renegotiated sustainable here-to-stay price increases that we implemented as a result of higher energy and other input costs.
The tailwind from pass-through price increases amounted to around 2 percentage points in Q1. These effects are rather volatile and hard to predict. Adjusted for this effect, our revenue growth would have amounted to 17.1% in Q1 2022. The larger price-related contribution comes from the sustainable here-to-stay renegotiated price increases, which totaled around 4 percentage points. These price increases are sustainable and will stay in place going forward.
Let's have a closer look into the divisions. Plastics & Devices reported revenues in Q1 grew from EUR 155 million by 19.8% to EUR 186 million. We had an FX benefit of EUR 4 million. The organic revenue increase was therefore 16.9%. This includes support from contractual pass-through of higher resin prices of between EUR 5 million to EUR 10 million.
In Q1, we had a strong contribution from all business units within the Plastics & Devices Division. First, our contract manufacturing business reached strong double-digit revenue growth in the first quarter, the second consecutive quarter with double-digit growth. The accelerated revenue momentum clearly shows that we execute on the back of a record order book level.
Second, our primary plastic packaging business, including Centor, achieved strong underlying volume growth in the first quarter, which was additionally supported by pricing tailwind from passing through higher resin prices. Last but not least, also our ready-to-fill syringes contributed nicely to our growth story.
The adjusted EBITDA increased from EUR 34 million by 16.9% to EUR 40 million. We had a minor FX benefit, which resulted in organic growth of 15.3%. Our strong organic growth was fueled by a strong product mix.
Primary Packaging Glass. The Primary Packaging Glass Division showed another impressive quarter. Reported revenues improved from EUR 147 million by 25.7% to EUR 184 million. FX support was EUR 6 million, translating into an organic revenue growth rate of 21.8%. Both business units, moulded and tubular glass, showed double-digit revenue growth rates. The strong growth in the tubular glass business was once again fueled by the high demand in High Value Solutions, especially ready-to-fill vials.
The adjusted EBITDA increased from EUR 26 million by 15.3% to EUR 30 million in Q1 2022. Excluding a low single-digit million euro FX tailwind, we achieved an organic growth rate of 11.1%. This is the third consecutive quarter of double-digit adjusted EBITDA growth for Primary Packaging Glass. Our sustainable here-to-stay price increases are taking hold, and our long-term hedging measures are starting to pay off.
Advanced Technologies. Our projects in Advanced Technologies are running according to plan. Reported revenues improved to EUR 3 million in Q1 2022, and the adjusted EBITDA was stable at minus EUR 3 million. We have a high focus on R&D in Advanced Technologies and, therefore, expect for full year 2022 that we should see a slight improvement in revenues with the same adjusted EBITDA level as in full year 2021.
At Advanced Technologies, we continue to strive to establish Gerresheimer as an innovative original equipment manufacturer for smart and connected devices in the health care industry. And our recent great progress with new projects underlines our innovation power. GAT is becoming increasingly relevant and will clearly contribute to our growth and margin acceleration.
Let's turn to the cash flow. We showed good cash flow development in the first quarter on the back of a strong cash conversion. In Q1, we achieved a positive cash flow from operating activities of EUR 2 million, representing an improvement of EUR 26 million compared to Q1 2021. This positive development was especially fueled by our strong adjusted EBITDA growth and the lower cash-out for the net working capital buildup.
Due to this strong improvement in the operating cash flow, we were able to almost fully compensate for the EUR 33 million increase in net CapEx. We already discussed our detailed CapEx plans before. One cannot judge the CapEx spend on a quarterly basis given the volatility of the spending pattern and phasing effects between the quarters. In any case, the high Q1 CapEx/sales ratio is definitely not representative for the remaining 9 months of the year.
What were the key CapEx projects in Q1? We expanded our capacity in Europe, particular in Wertheim in Germany and Chalon in France, with a focus on high-value vials. Both investments programs are supported by federal subsidies to ensure critical vial supply in Europe. Other important projects include the continued implementation of our syringe strategy and the production ramp-up of the new autoinjector in our contract manufacturing business.
What is the outlook for the cash flow? Depending on the execution of our investment program for profitable growth, we expect a positive free cash flow in 2022, and we will start to significantly deleverage by the end of 2023.
On this positive note, I now hand back to Dietmar to elaborate on the promising outlook for the current year.
Yes. Thank you, Bernd, for the insight into the CapEx details and also these very strong figures for the first quarter.
Yes, how can we sum up? I would say, we have made a very strong start into the year. All business segments and regions successfully contributed to this success. All our key growth drivers reported double-digit revenues expansions. We continue to deliver on the implementation of our formula G strategy process, and Gerresheimer also benefits from its resilient business model.
The excellent start into the year and the ongoing high demand in all business areas now gives us the confidence to increase our revenue guidance for 2022 from high single digit to now double-digit growth. So you can sum it up very easy, Gerresheimer is on track to achieve another record year.
With this, thank you for your attention for the moment. We are now happy to take your questions. Thank you.
Thank you, Dietmar and Bernd. So let's have the Q&A session. [Operator Instructions]
And the first question comes from Falko Friedrichs from Deutsche Bank.
So my first question is on your raised sales guidance. Can you provide a little bit more detail on which areas you think are performing better than you thought a few months ago? So the reasons behind that sales growth guidance increase.
Then secondly, could you quantify the headwind from higher energy prices you felt in Q1? And how should we think about this developing over the next quarters in light of your hedging strategy?
And then thirdly, many people seem to be worried about the extreme scenario of an energy shortage, so a complete shortage because we're being cut off from Russian supplies. How do you think this could impact Gerresheimer? And are you preparing for such an extreme scenario by, for instance, having already discussions with the government?
Thanks, Falko, for your questions. Just to start with the sales guidance increase, what we have seen that, basically, we are more successful, that's one aspect, we are more successful in our price adjustments than we have originally expected. This is one topic what helps us here. But what is even more important, we see that also our volume growth is simply higher than we have originally expected. And that's basically the reasons.
And if you look at it in detail, I think in our area of devices, we are growing more strongly in our forecast. And same is true for plastic packaging, including Centor. And we see the same tendency and trend also in our packaging division. So throughout the rank, you can really say that we are growing faster than we have originally expected. This is something to respond on this question. So therefore, you cannot signal anything really precisely out.
Regarding the headwind for energy price, thanks for this question, we had in -- I think in Q1, it's fair to say that after all countermeasures, I think we have net headwind of around EUR 5 million as far as the energy costs are concerned, so things which we were not able and where we didn't have any countermeasures in place.
This was -- if you look now at the plan, the peak of our energy costs actually comes from October, November and December. And this is on the back of our, actually, of our hedging, which we have implemented and get into full force now for the full year 2022, starting with the 1st of January, and this helps us in the end of the day. So that's the situation regarding the energy price development.
Yes. I probably take over the third question, which is, for sure, a very relevant question concerning the scenarios of the gas supply. And we intensively discussed it and are working on this. Of course, it's -- for us, I see this a very theoretical question, but let me elaborate in the following way. From our point of view, it's extremely unlikely that the supply will stop completely. Thus, a shutdown of parts of our facilities is extremely unlikely or even more unlikely.
Two, we have fixed contracts with leading European energy suppliers in place, which have to be fulfilled. Further, in moulded glass Europe, we are hedged to around 90% with regards to gas and electricity over a long period of time, actually 5 years. In other parts of the business, we are hedged up to 100%.
What is more important is the point that we are system relevant and system critical. As clearly proven during the COVID-19 pandemic, Gerresheimer has a great responsibility on our shoulders for the health of millions of people out there. Our products stand for security of supply in clinics, in doctor practices and vaccination centers. Our products are insulin pens, inhalers, prefilled syringes, injection vials and so on. They ensure the availability of important vaccines and medications. As such, we clearly -- so we see ourselves and the governments as well to be system relevant and system critical, and we do not expect that we are really hit by reduction of gas supply, for example, or energy supply.
The authorities itself, because you asked whether we are in contact with the government, it's not only the German government, because we are in contact with the governments, the authorities are aware of our business model since the outbreak of COVID-19, and we already now have received positive feedback of the governments towards our status of system relevant.
And I think there was another question in terms of the hedge, I think I answered it. I think we are hedged to more than 90% in the moulded glass areas. And I think very important to mention is also in the other areas of our business, beside moulded glass Europe, we are very well protected, looking isolated for '22 up to 100% for gas and electricity, but also long-term also in these areas, parts of this even with clear 100% green energy. I hope this answers your questions.
It does.
The next question comes from Craig Mcdowell from JPMorgan.
Just 2, please. The first one, on the EBITDA development and on P&D, I'm surprised that we haven't seen more drop-through in the business. You said that you were able to pass-through resin price increases and energy costs aren't as material, and it seems that mix is improving as well. So surprised at the sort of lack of EBITDA margin improvement. And equally, on PPG, where you talked about just a EUR 5 million headwind from energy prices, surprised at the level of margin contraction, if that is the case. Just wondering if you could speak to that. And then I've got a follow-up, please.
First of all, we posted an excellent first quarter, double-digit growth for both revenues and adjusted EBITDA. I think what is really important in times of inflation that you cannot look simply on the margin. You have to look at how the growth of the EBITDA actually is. And you see that clearly also if you look at the profitability level, basically, we passed on around EUR 20 million of costs to our customers without any additional profit. And this basically has the amount of, let's say, 1 percentage point of margin dilution. And if you add this on, then you have the same level as previously. And again, you had in addition this kind of headwind of EUR 5 million, as mentioned before.
So on this back, I can only say we are very confident for continued strong momentum in our adjusted EBITDA performance during this year 2022 and show a very clear path with a clear EBITDA growth, even clearly overcoming all these geopolitical and inflationary uncertainties.
Okay. And then just on the CapEx for this year, I think previously, you talked about a CapEx ratio to sales at a similar level to prior year, so around 13%. Just checking whether that ratio would be reduced given the noise, higher level of sales expected.
Yes, thanks for this question. Basically, we will stick to this 12, 13 percentage points range also when the sales are actually increasing. The difficulty is you cannot -- let's say, 1 percentage point, it's always a question back and forth. It's more a little bit more about phasing and timing than anything else. So it's very difficult to pinpoint this to the last percentage points. But we are expecting today, based on higher sales numbers, that we will be around 12 percentage points plus/minus 1 percentage point for the full year.
The next question is from Veronika Dubajova from Goldman Sachs.
I have 3, please. Just trying to reconcile a little bit the EBITDA guidance against the growth that you've already delivered in the first quarter, if I look at it, sort of double-digit EBITDA growth in Q1 already. And obviously, I presume the energy headwind fees as you move through the remainder of the year, especially in the second half, given what you commented on, Bernd. Just kind of curious, are there other headwinds that you're seeing that you're concerned about at this moment that leave you in a high single-digit EBITDA growth? Am I missing something? Or are you just giving yourself some wiggle room? So that would be my first question.
My second question, I noticed in your CapEx update, which was very helpful, that you have had follow-up orders in the Czech Republic. I presume that's on the inhaler contract. Curious if you can specify the magnitude there and when you would expect those to come through.
And then my final question is just a quick update on GAT and whether you have entered into any incremental conversations around potential contracts for the pump since we last spoke a quarter ago.
Yes, I would take the first question regarding the EBITDA topic. It's clear we have a strong revenue momentum in our business, and our increased top line guidance includes negotiated price increases which aim to offset cost inflation and, therefore, do not drive the margin performance. I elaborated on this before. And now in today's volatile market environment, we take a conservative approach to our full year adjusted EBITDA. And as usual, we will revisit our guidance at Q2 in 3 months from now when we release our Q2 numbers. This will be, in our point of view, the ideal point to discuss about our margin and EBITDA growth, especially for the full year.
Yes, I can take the topic on CapEx. Yes, the CapEx you actually see in Horšovský Týn is a very specific one. It looks, but you have to see that the CapEx is actually spent not in the quarter, but it's spent over time in various stages. What you see here in Horšovský Týn, because you are referring to this, is of course the inhaler, that's correct, but it's also other projects that are very helpful. In principle, you have to see that there are CapEx ongoing in the contract manufacturing in Horšovský Týn, but also in Pfreimd, but also in other areas of the business.
In the end, what we are doing here is it's the result of the very strong order intake that we had in the last months and years. And it's actually the foundation for the most likely double-digit growth you will see over the loop of the next years in this segment of the business.
So the third question, actually, I forgot.
It was on GAT and whether you've had any more conversations on potential contracts for the pump, Dietmar?
Yes. But you can imagine, I will not be able to elaborate on this. We are very successful in various talks not only with -- in the pump business for new contracts of the existing pump, but also the -- especially the new SensAIR large molecule pump. But here, I -- it's early stage, and I cannot elaborate in detail on these things. But you clearly see that what we -- that the advanced technology now is really showing positive results. The projects are very well underway. And we see an increasing -- we have strong confidence in that this business will now show positive results in the years out.
Okay. If I can just follow up on the Horšovský Týn. So have you gotten incremental -- has the glass contract scaled up since you last talked about it? Or is it something else that's driving the increased CapEx here?
It's this and it's also other projects that we actually did win on top in the second half of '21.
Next question comes from Oliver Reinberg from Kepler Cheuvreux.
So yes, [ the first question would be on gas supply ]. Can you just talk about to what extent [ can you replace gas through ]...
Oliver, we hardly -- we can hardly hear you. Sorry for interrupt, I think the line is...
Is it now better?
Yes, much better.
Sorry. So 3 questions, if I may. First question would be on gas supply. So can you just talk about to what extent can you replace gas through energies in your respective businesses? I guess in moulded glass, it doesn't work without gas, but is there any kind of business outside moulded glass where there's no ability to substitute gas to energies?
And also assuming the kind of worst-case scenario, which hopefully will not materialize, is the cosmetic plants in Tettau and Belgium would be cut off gas supplies. Is there any kind of thoughts that you can share with us in terms of any kind of backup or [ mergers ] you plan here?
Second question, please. Thanks for the color on your capital deployment strategies. Can you just talk about to what extent has your CapEx plan changed, if at all, on the back of this kind of energy crisis? So has this driven any kind of shift in terms of focus how to speedily deploy this CapEx, in which region to deploy it and also the mix between glass and plastics?
And the third question, please, on competitive landscape. Obviously, this kind of energy crisis is affecting us on a kind of global scale, but Europe is probably most the topic here. So to what extent does this affect the kind of competitiveness of moulded glass? I guess the European players here have to cope with higher energy cost. Is there an ability for capacities outside Europe? Or is it simply not possible on the back of higher transportation costs?
I think I take over some of these questions here. I think the gas replacement is something that is actually taking place over time. We have the first over, for example, in our facility in Momignies. That is now 100% only energy, no-gas energy, but it's something that takes place over time.
One more time, I don't see a risk of really reduced gas supply into the facilities of Gerresheimer as a realistic scenario because we are system critical, system relevant, and we will have the supply and the guarantee of the gas supply. So I don't see the scenario to be realistic.
And that fits also to the questions concerning the so-called cosmetic plant in Tettau. We have no 100% clean plants, there's no doubt. In Tettau, there is a majority of cosmetic, but there's also other products like pharma and also health care. This means you cannot just switch off one of the facilities because you say it's cosmetic because you would also switch off the other products. And a relocation in a regulated market like pharma is not a realistic short-term scenario. So I don't expect any really negative influence on this.
The CapEx on energy prices, I don't think that we have shifted because we already, in the past, had already planned our moulded plants for replacement of so-called hybrid ovens. It's a result of our sustainability strategy. We will set up the first oven in Lohr actually this year, which is a more than state-of-the-art hybrid oven that will use a higher amount of non-gas, but classic energy and very often green energy or 100% green energy, plus the ability to switch to hydrogen actually as the technology develops. And the next oven actually will -- no, actually, the first comes into Tettau this year and the next one comes into Lohr next year.
So that's to the CapEx. Otherwise, there is no changes due to the energy situation and also energy prices. And the competitive landscape probably is also a very important point. There's no doubt that the long-term hedge gives us quite a strong position in the competitive landscape. We are happy that the proof of our strong push-through of the cost inflation is a confirmation of our strong market position, but there's no doubt the strong hedge gives us quite a competitive advantage, and that's very helpful.
Our next question comes from Daniel Wendorff from ODDO BHF.
Two, if I may. The first one is about the competitive landscape for your RTF syringes and RTF vials. RTF vials seems to be a rather newly evolving field. So is that very similar in terms of market share competition there like with RTF syringes? Are there new competitors coming in? That would be my first question.
And then my second question, on the margin development in the glass division, in light of what we saw over 2021. And I appreciate you will talk more about this after Q2, but maybe you can give a comment on my suspicion that the margin pressure actually should rather only ease in the second half of the year within the comparable basis being also higher on the cost side of this business. Is it fair to assume that, in particular, in the second half of 2022, the margin pressure on the glass division should ease?
Yes, I'm actually happy to take the first question. It's because it's a very interesting topic, the ready-to-fill vials, yes? One more time, what does it mean, the ready-to-fill vials? In the end, we see that something happens that is very similar to the syringes. You are completely right with this, where in the -- many years ago, there was a lot of bulk syringes, and only a minority of the syringes actually were delivered in ready-to-fill. What does it mean, ready-to-fill? It's actually washed in a certain way, sterilized in the prepacked packaging. Now the market for ready-to-fill syringes is, in principle, 98%.
If you look at the ready -- at the vial area, the vast majority of all the vials, especially borosilicate glass, is all classic vials where the customers, the fillers are doing the washing sterilization processes. There's now an increasing trend towards ready-to-fill, and we are, of course, benefiting from this. At the moment, this market is dominated by small lot-sized biological customers. And here, of course, we enjoy very strong services and also nice prices and, thus, margins.
We believe that in the future, this trend will more and more go over and more of these vials will switch into ready-to-fill, which is a tremendous opportunity for us because you get higher prices, better margins for these products. In principle, you take over a certain part of the value chain of the filler and customers of today that is not core for them. To come to the competitive landscape, there are already a very limited number of players in the world that are actually able to produce vials in high volumes to the necessary quality.
The washing is even more tricky and complicated. In principle, the washing that leads a certain way of clean water is tricky, and the players that can do this ready-to-fill are, in principle, the players that are able to produce syringes. So it's the Becton, Dickinsons of the world, the SCHOTTs, the Stevanatos, the Gerresheimers, with one exception that Becton, Dickinson is actually not focusing on vials. As such, the number of players in the world that are benefiting from this ready-to-fill trend primarily are the players mentioned. And there is a very hard barrier to entrance for further players to come in.
And the margin development, probably you do want to take this, Bernd?
I take this over. Thanks, Daniel, for this question. Actually, what we see in PPG for the remaining 9 months, actually, we are benefiting overall with volume growth with very attractive products, especially High Value Solutions. This should benefit us. We are benefiting from the fact of the hedge we elaborated before on that. So we have a very stable cost situation here. And we are also benefiting from the fact that we are really able to get really additional price increases through the market. So on the back of this, we think and expect that indeed, it will, in Q3 and Q4, will basically ease and on back of this, reduce the margin pressure. That's indeed our view on the second half of the year.
Now we have a follow-up question from Oliver Reinberg.
Three, actually, if I may. Firstly, in terms of stocking, I mean, obviously, the kind of whole world is aware of a potential risk of shortages. So can you just talk about, have you seen any kind of stronger support or stronger orders on the back of this? Has Q1 been potentially benefiting from that? And do you actually have any kind of potential to increase capacity output if your client base are desperate for higher stocking levels? That would be question number one, please.
Secondly, on pricing, I mean it's very encouraging to see that you were able to pass on 4 percentage points via price. Can you just talk about how challenging is this kind of process and how much understanding you see from your client base? Is there any kind of chance to get any kind of color what is an assumption for the effect from price increases without pass-through for the full year? Given this is ramping up, is it fair to assume it may be more than 4% in the full year?
And the last question, please. On personnel cost, obviously, the personnel cost inflation is a major topic. People are being squeezed on [ fertilization ], supermarkets. So if this will be more of a pressure point in 2023, can you just talk about what potential wiggle room you have to offset that in terms of shifting people around regional relocation, any more automation? Any thoughts on that would be helpful.
Yes, I think I'll take the first one with the stocking and then you can take the other ones, Bernd. I think the stocking, I can answer relatively short. We don't see this trend and behavior from our customer actually. We would be able to serve more request if they would come, but it's not a behavior that we actually see at the moment, and it's not what is driving the Q1 at the moment.
Maybe, Oliver, I come to your second question regarding the, let's say, the pain for the price increases. I have to say, last year, it was very tough because we were, especially in certain areas, now a business leader of the pack and to increase the prices. And this was definitely tough now. It's a little bit different because especially given our energy price cost situation, which we have, now everybody is now really going out to the customers, increase the prices and on the back of this, let's say, regarding the challenges here to adjust our prices is a little bit lower than in the last year. But definitely, it's a must. And therefore, we also go for a next price round as far as especially PPG is concerned.
Regarding your third question regarding personnel, I can only tell you that based on our planning, we see a 4% personnel cost increase. And therefore, we have this quite good under control. Just to add on what you just said regarding the organic growth, without any support of pass-through effects and without any effects of price increases, here-to-stay price increases, which are part, by the way, of our guidance, we would also then, if you take all this out, we would also grow high single digits in our perspective for the next 9 months.
Yes. And we also -- we have to mention, I would like to add this that the wages, we should not only look at this with a perspective of Europe alone or Germany alone. I think we are a global company with sites everywhere in the world, and the wages are actually developing different. But we can -- we are handling this as any cost increase everywhere.
Are there any further questions? All right, as this is not the case, we would like to thank you for joining us today. All the best. Stay healthy. Bye-bye.
Thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.